Let's say it is my intent to make more profit. I make my boat available for 3 months out of the year. Unfortunately, the boat only gets booked for a single week.
Would my tax liability change?
Just like today, it you are going to take advantage of a tax exemption, you will have to keep records to verify usage. If you claimed you were going to use it for business for 3 months and only used it for one, you would have to make an adjustment in the tax. If you truly had it available for use, but just didn't have anyone interested, your records would show it hadn't been used and you had advertised it for charter. The point is there is nothing wrong with a legitimate exemption, but you will have to have records to back up your claim.
Unlike today, there would be 90% fewer collection points which means more focused auditing and a much simpler system to audit.
So, you keep good records and pay as you're supposed to. The system is fair. It taxes everything one time only, applies the same rate to all and gives every family the prebate based only on family size. It makes the cost of government clearly visible under the bright lights of the retail register and perhaps best of all, puts the money in the citizens hand first where he gets first choice of his/her tax burden. A tax on income is simply inconsistent with a free society...specifically the 4th and 5th amendments.
By the way, your point about State collections is a good one many people miss. Those strings held over the States heads today to get some of their citizens money back for highways or whatever else will probably start to disappear in my opinion as the States will have the money first and are likely to begin asking, "Why are we forwarding this money to the feds just to get it back with admin costs subtracted and strings added?"