[Pearls Before Swine]

..the national sales tax would eliminate taxes on the poor by sending every low-income wage earner a bonus check each year that covered the sales taxes for basic cost-of-living items like food, clothing and rent.

While I think the national sales tax is a viable substitue for the income tax, the procedure in the above sentence seems like trouble. If you send every low-income wage earner a bonus check, you're instituting a parallel income assessment scheme, with all of the complexity and likelihood for cheating we've come to know so well. Better to exempt food, rent to a certain level, clothes to a certain indexed level, and simply collect the tax than to collect and redistribute.

[KarlInOhio]

It's easier than that. The monthly poverty level is determined and the tax paid on that amount of purchases is calculated. This amount is then sent to each and every legal resident. Thus someone making and spending exactly the poverty level would pay zero net taxes. John Kerry would get some money to pay for snowboard wax. No one would have to report what they made.

[MTOrlando]

Exemptions are a bad idea. If you exempt one thing, lobbyists will be hired to get other "essential" goods exempted. Pile on this exemption and that credit, and soon the Fair Tax looks like our current system, with it's arcane loopholes and unintended side-effects.

Under Fair Tax, EVERYONE will get a check sufficient to cover the estimated tax collected at retail on the basic necessities of life, not just low income earners. Therefore, no personal income reporting is even necessary, and there is no incentive for individuals to cheat.

Compliance will be reduced to making sure that businesses which are selling goods collect and remit the proper amount of tax, and it's much easier to audit one business than it's 10,000 individual customers.

[ancient_geezer]

Under H.R.25(Fair Tax Act), all legal residents will receive a monthly demogrant called the Family Consumption Allowence(FCA) equivalent to the FairTax paid on essential goods and services, also known as the poverty level expenditures. The FCA is paid in advance, in equal installments each month. The size of the monthly FCA will be determined by the government's Poverty Level for a particular family size, multiplied by the tax rate, and paid to all households regardless of income or actual expenditure. The HHS poverty llevel is a well-accepted, long-used poverty-level calculation that includes food, clothing, shelter, transportation, medical care, etc. See chart in Figure 1 below.

 

Figure 1: 2004 FCA calculation
Family size	HHS annual poverty level	FairTax annual consumption allowance (single person)	Annual rebate (single person)	Monthly rebate (single person)	FairTax annual consumption allowance (married couple)	Annual rebate (married couple)	Monthly rebate (married couple)
1 2 3 4 5 6 7 8	$9,310 $12,490 $15,670 $18,850 $22,030 $25,210 $28,390 $31,570	$9,310 $12,490 $15,670 $18,850 $22,030 $25,210 $28,390 $31,570	$2,141 $2,873 $3,604 $4,336 $5,067 $5,798 $6,530 $7,261	$178 $239 $300 $361 $422 $483 $544 $605	N/A $18,620 $21,800 $24,980 $28,160 $31,340 $34,520 $37,700	N/A $4,283 $5,014 $5,745 $6,477 $7,208 $7,940 $8,671	N/A $357 $418 $479 $540 $601 $662 $723

[ The monthly FCA for each adult is .23 * (HSS poverty level for a single person)/12 to assure no marriage penalty due to the manner in which the poverty level is dependant on family size. The monthly FCA for each child is .23 * (the incremental increase of HSS poverty level for a family with one child over no child) ] A. Geezer

A family of four, for example, could spend $24,980 per year free of tax because they will have received over the course of the year a demogrant totaling $5,745. $5,745 is the amount of sales tax paid on $24,980 in expenditures. That family spending double the "poverty level" or $49,960per year will effectively pay tax on only half of their spending and, therefore, have an effective tax rate of 11 ½ percent or half the FairTax rate.

The beauty of the FairTax is that you can control how much you pay in taxes. If you happen to save, invest or spend a portion on used [previously taxed] items, you can get your effective tax rate below 9%.

To illustrate examine the tax burden that a family of four will have at various annual expenditure levels as compared to that same family under the current tax law, (2004 income plus FICA/MC):

 

H.R.25 "The FairTax Act

Not only does every family receive a FCA based on family size, not income, but they will also receive 100% of their paycheck.

[Willie Green]

While I think the national sales tax is a viable substitue for the income tax, the procedure in the above sentence seems like trouble.

Statement of John G. Wilkins, Managing Director,
Barcroft Consulting Group, on behalf of National Retail Federation
Testimony Before the House Committee on Ways and Means
Hearing on Fundamental Tax Reform

Mr. Chairman and Members of the Committee:

I am managing director of the Barcroft Consulting Group and I am here on behalf of the National Retail Federation. My statement reports on the findings of a study undertaken by PricewaterhouseCoopers ("PWC") for the National Retail Federation Foundation. I was principal author of that study, which examines the economic impact of substituting a national retail sales tax ("NRST") for the federal income tax.

~~~SNIP~~~

Conclusion

If a NRST is enacted, the U.S. economy would lag behind for at least three years and employment would dip by more than one million jobs. Beneficial effects would not be felt for at least five years after adoption. While it is admirable to seek a fairer and simpler tax structure to replace the incredibly complex income tax code, trading an income tax in for a national sales tax is an experiment that could bring serious harm to a flourishing national economy. Uncertain long-run benefits are far insufficient to risk the short-run setbacks in virtually all sectors of the economy.

[Principled]

If you send every low-income wage earner a bonus check,..

That's not how it goes. The "bonus check" as they call it is a demogrant, or "prebate" of taxes to be paid on necessities.

Each and every valid SS card holder may choose to receive it.

The prebate is not in any way tied to income level. It is tied only to the family size of the valid SS card holders. I can get the prebate, you can get it (if you have a valid SSN), and Bill Gates can choose to get it.

Look here for an explanation.

[SCALEMAN]

"Better to exempt food, rent to a certain level, clothes to a certain indexed level, and simply collect the tax than to collect and redistribute"

I'm on that page also. Exempt basics from tax and get rid of the infrastructure needed to redistribute.