A reader asks Greg Mankiw:
Professor: Could you shed some of your wisdom on the Boortz/Linder tax plan, the FairTax.
Dr. Mankiw said he liked the idea of collecting more of our taxes through a consumption tax, which is not surprising given his often stated view:
Many economists – and I include myself among them – believe that consumption taxes are better than income taxes because they do not discourage saving.
But you get the idea that he would not criticize the specific proposal from the gitgo:
As I understand it, the so-called Fair Tax plan calls to raise a substantial fraction of U.S. federal tax revenue with a retail sales tax. It is one form of a consumption tax.
My understanding is different in that the Boortz and Linder plan proposes to eliminate income taxes and put in its place a national sales tax that is not sufficient to fund the current level of Federal spending. We also have Dr. Mankiw on record reasonably arguing that increasing Federal deficits tend to lower national savings and crowd-out investment. Rather than directly addressing the Boortz/Linder tax plan, he suggests alternative ideas. Nice dodge!