Reply #4: Some "quibbles" with Bartlett's opinion piece

[stahbrett]

The monthly rebate proposed by the FairTax plan is NOT based on each household's income. Instead, it's based on the number of people in the house with valid Social Security numbers, and the U.S. poverty rate for that size of a household.

So if the government says that the poverty level for a family of four is $20,000 a year, and the sales tax is 30%, then a family of four would get a monthly rebate check of $500 ($20,000 x 30% = $6,000, divided by 12 months = $500). So a family of four that spends exactly $20,000 a year on taxable goods and services would wind up paying no federal sales tax, AND anyone in the household who earns a paycheck will no longer have federal withholding, Social Security, or Medicare taxes/fees withheld.

As far as states - they would get a percentage of the federal sales tax to offset their costs in collecting the tax. Most states do have a sales tax - the few that don't could either start collecting it, or businesses in those states would need to send the taxes directly to the federal government (it's not like businesses aren't already used to sending in taxes to the government).

Note - I am not in favor of the FairTax plan as it currently is devised. BUT - I think that it could be possible to modify it in such a way as to make it a better system than we have now. Because let's face it - the current system is awful.

I'd like to see something that would implement something similar (but improved) to the FairTax, but it would only take effect as the income tax is reduced. So if a 5% FairTax rate would replace X% of revenue from the taxes that it is supposed to replace, then the law that implements the FairTax would only become effective if those other taxes were reduced to offset that amount of revenue to make it all revenue neutral. Then we could all see how well/poorly it worked, without having our current system completely removed.