Let's assume you spend 100% of what you earn, and you earn $100. Under the present system SS/MC receives $15.30. Under Fair Tax you receive and spend your entire $100. You get $81.30 worth of merchandise and pay $18.70 in Fair Tax. SS/MC still needs $15.30 out of your $100 of gross earnings, so this leaves $3.40 to cover what presently is generated by income tax, which equates to a 3.4% federal income tax rate. If you are paying 3.4% federal income tax then, yes, please educate me.
You have not factored in the rebate. Factoring in the rebate will result in a lower effective tax rate than we have with our current tax system. Those on the lowest end of the income scale will receive more from the rebate than they will pay in taxes. Fair Tax FAQ #48
THis is a weakness to some, a strength to others.