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The FairTax is basically a federal consumer sales tax of 23%.  The FairTax proponents say it is inclusion, which means it is included as one price. This is the debate comes in. George Bush’s Panel on Tax Reform disagrees with the FairTax people saying it is more like a 34% rate. More on that later. The panel concluded that this system favor those making more than $200,000.

The argument

FairTax proponents say if that familiar widget sold for $100, the $23 would be sent to the tax authorities. Most would say hold on a minute.  because that would make the wholesale price $77($100-$23=$77) so take out your calculator and input $77 X 1.23 =$94.71 so that is going to leave you a little shy. That is the reason the panel said the inclusive rate is more like 30%. ($77 X 1.30). We use the exclusive method when we buy items.(price+salestax).I

The FairTax does eliminate the dreaded income tax return and payroll taxes for indivuals ,leaving the business owner paying for it’s employees FICA and Medicare taxes.

Conclusion

First the FairTax would have to be revenue –neutral, meaning it would have to bring the same amount of revenue as our current system does. We the FairTax proponents did their calculations’, it was based on a 100% compliance. Dream on.

Right now they need to give the Feds an exemption or a 23% discount or this tax will just be another category for federal spending.

The FairTax will exempt those making less than $15,000 and pay each household a prebate  at the first of every month. The prebate formula is 23% multiplied by the family consumption rate divided by the family consumption rate divided by the 12 months in a year

Example a family of would get $6205/12 or $517 per month (23%X $26181 consumption rate).

The states will not give up their sales tax so imagine buying a brand new car with a 31% added on.

I really don’t see why Ron Paul and Mike Huckabee think this is a good deal. Someone will have to collect the taxes at the federal level so why not keep the IRS? As complex as our current progressive tax system is ,I think it is better than the FairTax.

Am I wrong?

I got most of  my material from   

http://www.factcheck.org/taxes/unspinning_the_fairtax.html