errell tells us to visit the fair tax website (fairtax.org), which discusses the pros (but not the cons) of replacing our current income tax with a 23 percent Federal sales tax.
Sales taxes are well recognized as being among the most regressive ways to raise money, since both rich and poor pay the same rate, although the “prebate” proposed to make purchases up to the “poverty level” tax-free, would help.
However, two other issues suggest that the proponents of the fair tax are either very naïve or purposely deceptive. One problem is that a sales tax covering all purchases is not likely to make it through Congress.
Companies that sell, for example, yachts, are going to complain that their businesses will fail if they have to add a 23 percent tax to the cost of their yachts. What about home sales? Will the home construction industries be content with such a tax, or will they fight to exclude home sales from the tax? What about purchases outside the U.S.?
Given our experience with the current income tax system, does anyone believe that a flat tax has any chance of getting through Congress without special interest groups slipping in exemptions?
Second, and even more importantly, the fair tax proposal only taxes “the purchase of new goods and services for personal consumption.”