Q. "If the US gets rid of income taxes, will we have an even harder time paying our trillion dollar debt off? Or is that only covered by the bonds we sell to invest it? Just curious."
A. No.
Q. Why?
A. Glad you asked!
With the penalty for working harder and producing more removed, Americans are free to keep every dollar they earn, and a new era of economic growth and job creation is unleashed. Hidden taxes are history, Americans are able to save more, and businesses invest more. Capital formation, the real source of job creation and innovation, is facilitated. Gross domestic product (GDP) increases by an estimated 10.5 percent in the first year alone. The FairTax as proposed raises the economy’s capital stock by 42 percent, its labor supply by 4 percent, its output by 12 percent, and its real wage rate by 8 percent.
As U.S. companies and individuals repatriate, on a tax-free basis, income generated overseas, huge amounts of new capital flood into the United States. With such a huge capital supply, real interest rates remain low. Additionally, other international investors will seek to invest here to avoid taxes on income in their own countries, thereby further spurring the growth of our own economy.
I would also recommend going to FairTax.Org for more in depth answers. Also, since you are a friend I will let you borrow my signed copies of Neal Boortz Fair Tax and Fair Tax: Answering the Critics.
I hope this sheds some Light!
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