Thank you; I hadn't seen that report before, which seems to do an excellent job of summarizing both the "cash grant" version of a sales tax and the one that I would prefer (a simple "non-reversionary" tax, if you like):
Retail Sales Tax with No Cash Grant
Forty-five states and the District of Columbia currently have retail sales taxes. Many states use multiple sales tax rates and exempt many goods and services from tax. The Panel, however, considered a single-rate tax that would be imposed on a broad tax base because such a tax would be simpler to administer and create fewer economic distortions. The Panel’s broad tax base would apply to sales of goods and services to consumers, but, to prevent multiple taxation or “cascading,” it would not apply to purchases of goods or services by business that are used to produce other goods or services for sale to households.
The Panel initially evaluated the federal retail sales tax using the broad tax base described by advocates of the “FairTax” retail sales tax proposal. That tax base (the “Extended Base”) would exempt only educational services, expenditures abroad by U.S. residents, food produced and consumed on farms, and existing housing (or what economists refer to as the imputed rent on owner-occupied and farm housing). The long-term likelihood of maintaining this broad tax base is addressed later in this chapter.
Using the Extended Base and assuming low rates of evasion, the Treasury Department calculated that the tax rate required to replace the federal income tax with a retail sales tax would be 22 percent on a tax-exclusive basis. This tax rate, however, does not include a program designed to ease the burden of the tax on lower-income Americans. Moreover, unless the states repealed their existing sales taxes, most consumers would pay both federal and state sales tax on many goods. The weighted average state and local sales tax rate is approximately 6.5 percent on a tax-exclusive basis. Thus, for sales subject to both federal retail sales tax and state and local sales taxes, the weighted average combined tax-exclusive sales tax rate would be approximately 28.5 percent.
The 22% percent (stated on an exclusive basis) for the "no cash grant" version sounds much better to me than 30% with a prebate.
Also, with the FairTax, the effective tax rate actually paid will be substantially lower than the income tax rate that most taxpayers pay. In fact most taxpayers will have a much greater comparative purchasing power than under the income tax. Most will have an effective FairTax rate of 8% or less for a middle quintile taxpayer.