Tell you what. I can explain the entire concept of HR25 in a couple of sentences. Can you do that with the current tax code? No.
List your income. Subtract the deductions and personal exemptions. Look up tax.
You’re right. It took me three.
The concept of both systems is simple, the devil is in the details. It is impossible to compare the complexity of one system that has been in place for close to a century with a system that only exists on paper.
What I do know is that the FairTax supporters are in denial about major issues such as opportunities for tax evasion and potential action government could take to mitigate loss; effect of counting the tax paid by government on its employees salaries and purchases (except education) as revenue while ignoring the increase in the cost of government adding the tax would cause, and the effect that little oversight would have on rates; or the effect that the sales tax would have on large purchases like new homes.
From the National Association of Realtors:
As we understand many of the consumption tax models that have been presented, the incidence of a retail or transaction tax would generally fall on the purchaser. We are unable to imagine how buyers, sellers or housing markets could bear a 30 – 45% tax burden. We question whether prudent lenders would be willing or able to finance the sales tax cost, as a long-term financing mechanism would almost certainly require mortgages that would exceed the after-tax value of the home. If a home that had been subject to the sales tax were sold before the tax liability had been extinguished (which we believe would be the general rule), the owner would likely realize no cash, as the outstanding tax and mortgage liabilities could easily use up most or all of the proceeds from the sale. Thus, a tax on home purchase is ill-advised.
In addition to the sales tax on new homes, the lender would also be required to add the sales tax to the cost loan service. This added cost would apply to credit card debt as well, savings, and checking accounts.
On the other hand, business would have the competitive advantage over the individual in the purchase of goods and services. Buy a new home to rent, and pay no sales tax (BTW, the renter pays the tax on his rent) - the home would only be taxed when or if converted for private use. Buy a fleet of cars for your company and pay no tax, the tax would only apply when the used car is sold for private use.
In addition, the FairTax does not eliminate ALL taxes, for instance, the federal gas tax. So, while FairTax proponants claim that taxes couldn't be raised without public awareness and outcry, they ignore the very real possibility of those hidden taxes, which are now relatively insignificant, could be increased under the radar. (Not that politicians would ever do such a thing.)