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Poor people will always support the pols that want to increase the prebate, whether the gov’t has the money or not. As the amount increases, more & more people become ever more dependent on that monthly check. You will NEVER be able to lower the prebate without seriously angering the ENTIRE population. No pol will ever allow that to happen.

It will be the people who prevent the prebate amounts from increasing. In order for your scenario to work spending will have to increase to support a corresponding increase in prebates. That in turn will require The Fair Tax rate to increase.

This is unlikely to happen since it would require raising The Fair Tax rate too high and will therefore cause people to cut back on their purchases. A reduction in purchases will lessen the amount of tax collected. Less tax collected will force the politicians to cut back on spending and thereby lower the prebate amount back to it's original level. Congress can only maximize tax collections via consumption within reasonable margins. Founding father and first Secretary Of The Treasury Alexander Hamilton recognized the power a consumption tax gives to the people in his Federalist Paper #21. To quote:

"It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty, that, "in political arithmetic, two and two do not always make four." If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them."

Correct me if I am wrong, but the FT proposal makes no mention of a balanced budget. Congress is not currently limited in their spending by a shortfall in taxes collected. Therefore, the prebate can be raised until the world refuses to give the Feds any more credit. But you just try lowering the prebate as the system implies could happen, & watch the Revs. Sharpton & Jackson lead the bloody riots in Washington.

“It will be the people who prevent the prebate amounts from increasing.”

Huh? People wanting less free money from the gov’t? Since when? Amish? Besides, the people have ZERO control over the prebate calculation.

from fairtax.org FAQ:

“The size of the prebate is determined by the Department of Health & Human Services’ poverty level guideline multiplied by the tax rate.”

If the tax rate is increased, the prebate automatically increases, but a prebate increase does NOT trigger a tax rate increase. That must be passed by Congress.

Thanks for posting this article today. It made me review the FT web site & I learned some things today.