From FactCheck:

Independent groups also dispensed misinformation during 2007:
 Advocates of the so-called "FairTax" claimed a 23 percent national sales tax can replace both the federal income tax and Social Security taxes. In truth, the actual rate would have to be at least 34 percent even if it fell on new homes, mortgage and credit-card interest and a host of other products and services not usually subject to state or local sales taxes.

Told you so !

Reduce the federal government to performing only its Constitutionally sanctioned tasks, and a national sales tax of ONE per cent would yield a surplus!! Retain only a few genuinely needed social programs and a FIVE percent tax would be enough.

See: People's Liberation Party

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www.lonewolfsurvivalist.com

Oh, gosh! If FactCheck says so, then I guess I can just ignore the tons of independent research done by actual economists.

Actually FactCheck does a pretty good job at debunking the Fair Tax snow job.
FactCheck.org: Unspinning the FairTax

And they justify the 34% number with some serious logic.
With the Fair Tax proposal as it stands, the only people who actually would pay more taxes are those making between 15,000 and 200,000 a year.
Which is what we commonly refer to as "The Middle Class".

__________________
“ The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

Adam Smith , The Wealth of Nations 1776

"We have always known that heedless self-interest was bad morals; we know now that it is bad economics"
FDR's second Inaugural Address

I was going to write a rebuttal to this, but figured you probably wouldn't actually read it and think about what I wrote. So, I'll just link to the Americans for Fair Taxation rebuttal to the same article.

I'm curious though, goober, have you read through the actual research, or are you simply accepting the contra argument for some other reason?

While I certainly appreciate any reserach that is against the FairTax, I think it all sort of misses the point. The FairTaxers act as though there is some mystical reason that makes an income tax especially bad. I do not care how the money is collected, I only care that too much is collected. The problem is not the collection method; the problem is the collection ammount.

Let's assume that the numbers in the FairTax book are accurate. They are correct when they argue that consumers will no longer have to pay the embedded taxes. Sure, firms could still charge the same amount and take the windfall, but the FairTaxers are correct when they argue that competition will force the price back down close to its orginal level. So, according to the FairTaxers, because they do not have to pay an income tax, people's net income will increase. Sounds good right? More money to buy products that cost the same.

However, the FairTaxers fail to apply the logic of competition to employee wages. In addition to the prices of goods falling, the wages of employees will fall due to competition. So, in essence, we will have the same amount of money with which to buy goods at the same price.

Then, there will be some "emergency" and Congress will enact the income tax again. At first, it will be on the top 1% of income earners and at a small rate. Then, it will grow and grow and we will be saddled with both a "Fair"Tax and an income tax. Yeah, yeah, I know that the 16th Amendment has to be repealed, but so what? Part of the FairTaxers' beef with the current system (and they are again, 100% correct) is that polticians have grown government outside the bounds of the Constitution. Why then, would they expect that politicians would follow some silly constitutional prohibition. I mean, the 2nd Amendment is clear that Congress cannot restrict the ownership of guns, yet there have been many laws that do just that.

So, bottom line, after a few years under the FairTax, people will net the same and products will cost the same. Then, we will have the FairTax as well as the income taxe. A bleak future.

One time, I got, I don't know, silly enough, or low-minded enough to call the Boortz show. For those of you who don't know, he is an Atlanta-base libertarian talk-show host who co-wrote The FairTax Book with that sleeze John Linder. Now, I like Boortz. Sure he is wrong on a lot of stuff, but he introduced me to libertarianism, and even though I have taken the libertarian philosophy to its logical end, and he hasn't, I still have a soft spot for him. So, I called, and I brought up these points. Unfortunatly, I got a little flustered and I wasn't able to say everything I wanted to say. However, I knew that I had "won" the debate when he started going ad hom. Because I am only 21, I don't really know what I am talking about, according to Boortz. After he hung up on me, he told his listeners that I was only calling to make fun of Boortz.

__________________
"Sometimes it is said that man cannot be trusted with the government of himself. Can he, then, be trusted with the government of others? Or have we found angels in the form of kings to govern him? Let history answer this question."
-Thomas Jefferson in his first inauguration address

15 k is middle class? where?

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No individual can plan his own existence in their view.

So the state planners must arrogate to themselves the right to manipulate any sector of the economic system if the good of “society” or the “general welfare” is paramount.

Ipso- if the rights of the individual get in the way, the rights of the individual must be sublimated.

The Road to Serfdom
FA Hayek (interpretation)


Mortgage Backed Security survivor

And what about the number of ecnomists against the FairTax? What about the very free-market people at the Mises Institute and those who write on lewrockwell.com? They are against it. What about the late, great Murray Rothbard?

__________________
"Sometimes it is said that man cannot be trusted with the government of himself. Can he, then, be trusted with the government of others? Or have we found angels in the form of kings to govern him? Let history answer this question."
-Thomas Jefferson in his first inauguration address

Had the OP used these sources to "[put the sales] tax vs [the] income tax argument to bed", then perhaps I would've written something else.

Economics is as much art as science, liberty, and different economists can reasonably come up with different viewpoints. The FactCheck article does not use any reasonable economic arguments to disparage the FairTax, it uses misinterpretation.

As a libertarian, I'm curious why you don't like the FairTax. Aren't you ignoring the blatant abuse of power allowed the IRS? Are you unconcerned with the invasion of privacy that is the income tax? Does the prospect of the populace knowing exactly how much money it's paying in taxes not sound appealing? Shouldn't more market forces be brought to bear on the Federal government's purse?

To argue the income tax will simply come back is ridiculous. The government can do whatever it wants to do, so we might as well argue there will be some emergency and the income tax will be raised to 90%. Government has usurped this power to do whatever it wants largely through the income tax and the favors it can buy with the tax code. Take the tax code away and we take a big step toward regaining control of our government.

The problem is not as much how the government collects taxes (though the income tax is especially intrusive), it's how much the government spends. Until the populace is confronted with exactly how much it's spending in taxes, it will never be concerned with how much the government is spending and what it's spending on. The FairTax is the first step toward a fiscally responsible government exercising the powers it was granted, and only the powers it was granted, in the Constitution.

Right, I udnerstand that.
Yes, but there are not multiple correct answers. There is always one correct answer. Now, one thing that frustates me about anti-FairTaxers is that they constantly do a very poor job of arguing against the FairTax. They make a big deal out of the inclusive or exclsuive thing, they argue that prices will be 30% more expensive, they talk about how it is unfair to the poor, for some reason they make state taxes a huge part of the argument. So, when someone writes an article against the FairTax, it is easily dismantled by the FairTaxers. I suggest going to lewrockwell.com and reading what Jim Cox and Laurence Vance write about it.
Because I am a libertarian, I am against the FairTax.
Yes, I am very much concerned with this. In fact, most of the FairTax book is really good. They do a very good job of blasting the income tax. But I don't really know what the FairTax is going to do to help this. First, the Social Security Administration will still look into employee's wages to determine what benefits they recieve. That is in the FairTax Book. Then, of course, it seems that there might be government agents will have to oversee the collection of the tax in stores and this seems like it might invite invasions of privacy as well.
Yes, but even more appealing to me is people knowing that the amount they are paying is 0. One of the biggest problems with the Income tax is this stupid with holding scheme. By the way, "free-market" economist Milton Friedman (you know, the Cato Institute gives the Milton Friedman Award for Liberty or something like that) was a huge proponent in getting with holding thing going.

But, I don't really know if the FairTax is going to solve this. The FairTax is included in the sticker price of a good. Consumers, therefore, are not going to really realize how much they are paying in taxes. They are not going to experience the shock of seeing the price of their purchase go up 30% when they ring up. So, it seems that the American people won't have a huge idea of how much they are paying.

What market forces are you talking about?
When was the last time the people made a tax deal with politicians in which the politicians kept their side? I think there is a very small chance that we will end up, in the long run, with a FairTax, and a FairTax only, and the rate remaining at 30% (or whatever it is.)
No, I don't think it is a right step. It MIGHT be a step in the "not-wrong" direction, but it is certainly not a step in the right direction. The government will still collect the same ammount of money, it will still spend, and it will be just as hard to cut spending and/or taxes with the FairTax.

__________________
"Sometimes it is said that man cannot be trusted with the government of himself. Can he, then, be trusted with the government of others? Or have we found angels in the form of kings to govern him? Let history answer this question."
-Thomas Jefferson in his first inauguration address

Just curious (and too lazy to check).

Would the sales tax apply to home sales? If it did, how much tax would be applied to a 300k home? 50k?, 100k? What affect would this have on construction and real estate? I have rented for 20 years, may as well for the next 20 as well.

If the tax were exempted on primary residence, how high would the tax need to go to compensate?

I would never buy a new car again. I doubt I would be alone. Hasta la vista Ford and GM. I suppose we could exempt primary transpotation, but doing so removes a good chunk of revenue from the stream. Up the rate again to compensate.

What affect does the tax have on an economy driven by consumer spending? How much would folks cut back on spending? If spending goes down 20 - 30%, it would seem the sales tax rate would again need to increase to remain revenue nuetral.

For these reasons, it seems you cannot simply takes folk's current spending amounts and use this to come up with a sales tax rate needed to be revenue nuetral. People's spending habits would change drastically, at least mine would. I would not buy a home, new car, go out to eat much less, and attend fewer events.

I read of mechanisms to allow folks with lower income to get thier money back. Doesn't this require the entire mechanism of income reporting to remain in place? Employers, banks, traders would still need to document and report incomes.

At the end of the year, if I make less than x dollars how do I get some of my money back? I assume forms would need to get sent to the feds. I suppose we could call it something other than 1040. Which government buracracy do I send it to? Who checks the accuracy and honesty of these forms? Not the IRS I hope.

But it is a 30% sales tax, not a 23% sales tax, because that's how people talk about sales tax.
It's like six ounces of gold weighs as much as 8 ounces of lead, because gold and silver and platinum are measured in troy ounces, If I sold you a half pound of gold and described it as 8 ounces, I'd be scamming you big time, the context of sales tax is tax exclusive, because every sales tax is expressed that way.
Here's why, say you are using a $20,000 automobile as an example, and a $20,000 income as an example.

Now if the income tax is 10%, it's $2000.
If the sales tax is 10%, it's $2000.
Because you express it as a percentage of the number you start with.
People know what they pay for stuff now, so if you tell them, add 30% to that, they can do that easily, but if you say the new price will include a 23% tax inclusive calculation, then the new price requires several steps to figure out.
I know this is explained in the fine print, but it's dishonest to say a 23% sales tax, because sales tax means "added to the price".


Yes, I have read about this, I read your link, too, but let me ask you this.

If the Fairtax collects as much as the current income and payroll tax system does, and "almost everybody" pays less tax, who pays enough in extra taxes to make up for "almost everybody" paying less? Since the very wealthy realize the greatest tax savings with a Fair Tax, and you claim the poor make out like bandits under the Fair Tax, then it's the middle class that has to make up the difference. Someone has to pay more, who is it?

If the federal government is paying the fair tax, doesn't that mean an immediate increase of 30% in the Federal budget to cover the Fair Tax?

__________________
“ The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

Adam Smith , The Wealth of Nations 1776

"We have always known that heedless self-interest was bad morals; we know now that it is bad economics"
FDR's second Inaugural Address

Not really. Ask ten different economists and you'll get ten different projections. There's been some clarity in applied economics, but only because applied economics replaces the theory of what rational people would do with the reality of what they actually do. People simply aren't rational, and that makes economics tricky.
I've been out of this debate for quite awhile, because it's just as you say - the anti-FairTaxers have no good argument. The net is so cluttered with their misinterpretations that I had no idea there was some actual substantive argument against it. I'll check out your suggestions. Thanks.
To the first point, while the SSA might have to confirm your income, they won't be rifling through all your receipts to see how many times you visit Madam Wong's House of Pain for business. A simple confirmation of income isn't nearly as intrusive as what currently goes on. To the latter point, government agents already oversee the collection of taxes in stores.
We'll never pay 0. There are legitimate functions of government, and it takes money to perform them. We have two problems, in my opinion: 1) Do we get the money so that it treats all citizens equally (or do we allow politicians to buy votes by guaranteeing certain segments of the population get lower taxes?), 2) Do we spend the money to perform the necessary functions of government (or do we allow politicians to buy votes by guaranteeing certain segments of the population extra pieces of the pie?). Until we address the first problem, we have no hope of addressing the second.

If I understand it correctly (and it's quite possible I don't), the sticker price will be tax inclusive, but the receipt will break down the tax. Regardless, we'll know when the government starts getting greedy again because they'll have to vote to raise the tax. We won't be able to ignore it because it will apply to everyone. We won't be able to say, "Oh, well, they're just raising taxes on the "rich". I don't have to worry. In fact, I think the "rich" should pay more! Hell, yeah!" Nope. It'll be, "What?! Are you effin' kidding me? If you raise the tax you won't have a job next election time."

These are the market forces I'm talking about. Right now, nobody knows how much they pay in taxes. They take a look at their paycheck and think, "Oh, good, I got to keep a little more this month." They think they're actually getting something special when the government gives them their own money back come April 15th. They fail to realize they just gave the government an interest free loan for a year. Get the people back involved in what their government takes, and you get them involved in what their government spends. We won't be making choices like, "Which politician will guarantee me the most of other peoples' money?" We'll be making choices like, "Which politician is going to work to stop spending so much effing money?"
Well, it's the best idea I've heard. Do you have alternatives?

The tax only applies to purchases of new things. So, yes, you could effectively avoid a great many taxes by simply buying used. Which makes me wonder why so many liberals are against the plan. Theoretically, we should see a big surge in recycling, reducing a great many environmental problems.
You might because you're more intelligent than the average person. Most people just keep spending and spending and spending. As you said, we're a consumer society. We're not going to cure that addiction anytime soon.
Everyone, not just folks with lower income, gets a check at the beginning of the month that covers the tax on purchases made for necessities (food, clothing, medicine, etc.). The amount they receive is based upon the poverty level as reported by the HHS. The IRS goes away. The SSA cuts the checks (something it already knows how, and is set up, to do).

Then draw attention to the fact that your income tax goes away, and if quoted the same way your income tax rate would be much higher than you believe it to be.
See, you're making the same mistake every anti-FairTax writer makes. You're not understanding the math.

Let's use your example:
Suppose you want to buy a $20,000 car, how much money do you have to convince your employer to pay you if you're in a 10% income tax bracket (for brevity and simplicity, we'll ignore all the other taxes that come out of your paycheck before you even get it)? If you said, "$22,000", you're wrong. You would have to convince your employer to pay you $22,222.23. Then the government comes in and applies the 10% tax rate and you get to keep $20,000. (22,222.23 * .10 = 2,222.22; 22,222.23 - 2,222.22 = 20,000).

So, without the FairTax, you have to earn $22,222.23 in order to buy a $20,000 car. With the FairTax, you have to earn $20,000 in order to buy a $20,000 car. In the above example, if you're going to quote both like you would quote sales taxes (tax/price of item), then the FairTax rate is 10% and the income tax rate is 11.1% (2222.22/20000).

Now, you can quote whatever rate you want, as long as you represent both tax rates under the same terms. Since income taxes are quoted in inclusive terms, and the FairTax replaces incomes taxes (as well as a great many other taxes), then the FairTax should be quoted in inclusive terms. The link I gave you provides much clearer examples of this in numerous papers.
I don't think anyone ever claimed that everyone would pay less. If you have a link to that I would love to see it.

However, significant money will be freed u