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You stop after reading the first line that says what you want to hear ?

wgflyer gave you two points: a new tax where there wasn't one before; an elimination of existing taxes, ie, a hidden tax on purchases and future income taxes on the ROI of the savings.

Sure there will be a new tax, but existing taxes go away.

So what is the NET effect ?

So what is the NET effect ?

Many people will be taxed again when they spend under the new tax what has already been taxed under the old tax. What in hell is so difficult to understand about that?

"Sure there will be a new tax, but existing taxes go away.
So what is the NET effect ?"

Ok, good question. I guess the simplest way to put it is with a question: Would you rather pay a dollar for an item and keep the current IRS and all of it's hassles and costs, or would you rather pay $1.01 for the item and dump the IRS and all of it's hassles and costs?

The net effect the FairTax is more money in your pocket because you don't pay any income tax and you don't have to deal with the IRS. You don't pay any federal taxes at all (remember, we're talking at the federal level only. State and local taxes are unchanged by the FairTax) You file no 1040. Your capital gains and interest are untouched. No one (except liberals) cares how much you make any more. Then when, and only when, you buy something new, you pay a tax.

There are quite a few people out there raising fears over the amount that the FairTax sales tax would be, but as proposed it is 23 percent. And, under current calculations by those who have researched this extensively, that would be an increase of 1 penny on the dollar on the price of goods after the FairTax is enacted because the embedded costs of tax compliance under the current system fall out of the price you pay now currently.

I'm not an accountant. Don't want to be. I hate with unbridled passion sitting down every year and spending hours working with unintelligible forms demanded by the IRS just so that I can get a portion of the money they stole from me back. I hate it that they take it in the first place and have hated it since my first job in my teens. Under the FairTax they can no longer take anything out of my paycheck, including social security and medicare, and I no longer have to worry about dealing with the IRS, ever. If the FairTax people are correct, the price of things I buy changes little but I have more money available to me to spend. A net gain. Furthermore, there are no tax penalties for early withdrawal on tax deferred savings plans and investments no longer require careful tax considerations. It is win/win.

With a flat tax, we still keep the IRS and all the accounting and legal headaches that come with it. Thus, the embedded IRS costs don't go away. They might get more simple, for a while, but they don't go away and congress can still manipulate individuals through the tax code. You still owe them money just because you made it. The net loss is the embedded tax. Whatever other savings you make by changing to a flat tax, you suffer a net loss in the embedded costs of compliance and you still have to deal with the IRS every year.

Remember, the FairTax is for government purposes, a revenue neutral plan. It is not designed to change what the government takes in. It only changes the way that people pay the government, and greatly relieves the public of the current pains involved with tax compliance. It also greatly frees them to conduct private or public business unencumbered by those extra costs of compliance.

Many FairTax people actually feel that the tax will be lowered after a while because of the surplus brought in by such a free economy. I don't trust government much to do that so I don't count on it. But getting rid of the IRS is worth a lot more to me than just a penny increase in the price of goods.

Sorry to be so long winded.

Eskimo said regarding taxes paid on savings:

"I hope not, it is a serious flaw affecting a large portion of the population. It needs to fixed not argued for."

My answer is that I don't think that there is any way to make savings tax free at some point so long as we pay taxes, period. However, go back to my opening response, to the question I put forth, and think about that. I take the second choice, hands down.