Reply #132: The "Fair Tax" is a sales tax. There is one rate....

[Egalitariat]

although things like medicine, food, and clothing might be exempt. There are no brackets, deductions, or anything else.

Everybody (I really mean everybody) gets the rebate of the amount of taxes they, based on their "situation", would be required to pay in order to live at the poverty level. By situation, I mean the things you have to know in order to calculate the poverty level (whether you're married, # of dependents, where you live, etc).

The beauty of the system is its simplicity. The current Internal Revenue Code is extremely expensive for the IRS to enforce. The "Fair Tax" would not be. The current Internal Revenue Code is extremely expensive for taxpayers and business to comply with. The "Fair Tax" would not be.

Right now, I pay my accountant about $250/year to compute my taxes. I also pay (embedded in the price of goods) for Publix to pay it's accountants and lawyers when I buy Tide from Publix. And I pay for Procter & Gamble's accounts and lawyers (also embedded) for the same bottle of Tide.

All these costs go away. Cynics will tell you that Publix and P&G will simply keep the cost savings as profits to distribute to their shareholders. Academics will tell you the market economy (via perfect competition) will force these companies to pass along the savings to their customers (me). The truth is that it will fall somewhere between.

So, in the end, the cost of the good goes down but the tax on the good goes up. Does it become a wash? Maybe, maybe not. But by giving a rebate on the taxes paid to live at the poverty level will ensure those who have to live at or below the poverty level pay nothing in taxes, and those that live just above it pay very little.

And the government would require less money to operate because the cost of enforcing tax compliance would almost (relative to the current IRS) disappear.

That's why I like this plan.