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Just wanted to address your comments on the responses you received and on questions you had. Hope this answers some of the questions:
Economist William G. Gale at the Brookings Institute has determined that most low income families will pay more taxes."Under the Americans for Fair Taxation proposal, taxes would rise for households in the bottom 90 percent of the income distribution, while households in the top 1 percent would receive an average tax cut of over $75,000."
response:
The FairTax provides a tax rebate to every household equal to the sales tax rate (23 percent) times the HHS poverty level ($16,050 for a family of four). Thus, households that live at or below the poverty level will not pay any sales tax at all, and no household in America will pay sales tax on the cost of the basic essentials of life as estimated by HHS. Because of the rebate, the effective FairTax sales tax rate for a family spending $32,100 is only 11.5 percent. Most families earning spending $32,100 have combined payroll tax and income liabilities of over 11.5 percent today. If you take into consideration only the entire payroll tax of 15.3 percent today that family will pay 30 percent more tax today than they would under the FairTax. And this does not include income taxes or the hidden component of tax in goods and services they purchase
Most middle income Americans will pay less tax under the FairTax plan. For example a family of four earning and spending the median household income in 1996 ($34,475) would pay $4,238 under the FairTax plan and pay $5,184 in income and employee payroll taxes today. Thus, this very typical family would pay 18 percent less tax under the FairTax than under current law. Any household of four earning and spending $24,049 or less will pay less than just the 7.65 percent payroll tax alone (one-half the tax actually imposed on payroll.)
your comment: You are right in saying that the "FairTax is actually a tax on accumulated wealth". I think that might be the biggest reason why it will never pass. Senior citizens as a group have the largest accumulated wealth of any demographic group and they'll get hit hardest by the tax. I can't imagine a tax plan that hits the elderly the hardest will ever be implemented, particularly when it also gives a break to the highest income earners.
response:
Seniors are hard hit now! everything they buy had embedded taxes in them from the cost of production, corpate taxes, payroll taxes etc. It is all paid by the consumer. So seniors are paying that now.Research by Harvard economist Dale Jorgenson shows that producer prices will fall 20 to 35 percent under the FairTax plan since the income tax and payroll tax is embedded in the price of everything we buy.Seniors pay either way. The FairTax ensures Social Security’s soundness by funding it with a progressive, broad-based national retail sales tax, rather than the current regressive, narrow payroll tax.
According to research by Stanford University economist Joseph Kahn, those seniors with a net worth over $400 thousand (nearly four times the median) may see a slight reduction in their purchasing power. The largest decline in purchasing power, about 3.5 percent, is for those with a net worth above about $700 thousand. The primary reason for this effect is that wealth spent for consumption purposes that is held in non-tax deferred accounts like IRAs is taxed when spent under a sales tax and would not be taxed any further under current law.
