[kevkrom]

What I am talking about is the millions who pay next to nothing in federal taxes, or nothing due to their very low earned income, which includes a lot of retired folks as one example. To them it could be a very large burden.

The NRST as proposed has what is called the Family Consumption Allowance (FCA), which provides each person (with a valid Soc. Sec. number) with a monthly allowance equal to the taxes paid on poverty-line (i.e., subsistence) spending. This essentially makes the NRST progressive, not regressive, as those who only spend up to the poverty line have an effective tax rate of 0%, spending double the poverty line leads to an effective rate of 50% of the sales tax rate, etc.

An example with made-up numbers for simpler math:

Assume an NRST rate of 20% (tax-inclusive), and a poverty line of $12,000 per year ($1,000 per month) for a single person. Each month, that person would be eligible to receive an FCA of $1,000 x 20% = $200.

If the person spent a total of $1,000 that month, they paid $200 in taxes. Their net taxes paid is $200 - $200, or $0 (0% effective tax rate).

Someone else spends $2,000 ($400 in taxes), their net tax is $400 - $200, or $200 (10% effective tax rate).

Bll Gates spends $100,000 ($20,000 in taxes), his net tax is $19,800 (19.8%).

As spending increases, the effective tax rate logarithmically approaches the marginal tax rate. Note that for those who are not eligible for the FCA (specifically, illegal immigrants), their effective tax rate equals the marginal rate.

Now, of course, the effective rate is in relation to spending. If you only spend 75% of your income on retail goods and services, your effective tax rate in relation to your income would be 75% of your effective tax rate in relation to retail spending.

[M. Dodge Thomas]

One of the issues here the extent to which states will attempt (and will be allowed) to in effect "re-capture" the additional disposable income of low income recipients provided by monthly NST rebates via state sales taxes (there would be enormous political pressure to allow states to raise additional revenue in this manner, "If it's good for the Federal government, it's good for us").

So at a minimum (unless you are willing to eliminate the "progressive" nature of the NST) state taxation would have to be made subject to "progressive" assessment in the same manner as the NST - which is going to aggravate "States Rights" opinion no end.