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Thanks Pigdog.

I am not privy to the strategy within the AFT either. I am sure they expect there to be some wrangling, and if the deferred-accounts windfall gets bargained away, I won't cry about it.

I said I had several issues that I am not entirely happy with in the FairTax as written.

Second issue: The Prebate.

The Prebate structure is somewhat at odds with the basic assumptions of the FairTax. On the one hand, it's purpose is to make sure nobody pays the FairTax up to poverty-line spending. On the other, a basic assumption of the FairTax is that prices will fall so that adding the FairTax back on will restore prices to where they are now.

So why would anyone need a Prebate ?

If prices fall, then nobody's purchasing power has been hurt. The only purpose of the Prebate in that case is to create "Progressivity", or to "help the poor". Another way to describe a "progressive" tax system is to say there is a "success" tax to fund welfare programs.

I understand the ideological debate of limited government and income redistribution is a separate issue from tax reform. And I applaud the FairTax as a valuable first step in at least making people aware of the cost of government. But ... the Prebate is effectively a welfare program where those at the poverty line will realize an improvement in their standard of living at no cost to themselves.

The AFT panders to the liberals by saying "we will completely untax the poor". Why ? When something is "free" to a person, that person does not value it, and they are more likely to waste it. Government should not be a "free" good.

The person living at poverty level will have no incentive to fight against a rise in the FairTax rate. Because it would actually mean a higher Prebate check for them, and if they are not spending all their income at retail, it means an increase in the tax rate actually benefits them.

Maybe this is a necessary evil to bring in support from liberals, but I think the Prebate is a bad idea.

I view the prebate a bit differently and it seems to me to be quite filling for the basic precepts involved.

The way the income tax is structured, there are many low income folks who pay little or no income tax (and, of course, quite a number of those who DO). It works a much bigger hardship on such families to universally have to pay a sales tax - which, despite claims to the contrary by the SQL group is not easily avoided - that represents a large percentage of their income.

The prebate is intended to take this tax burden from them - or at least to greatly lessen it depending upon their income. This also helps not just those at the poverty level, but all taxpayers as it lowers their effective rate also. Just lowering the rate does not accomplish the same thing since the idea is to maintain revenue neutrality and having no prebate and a couple of points lower tax rate would not greatly help most people. The small percentage added by the prebate would hardly be noticed by an individual, but the overall funds raised would be considerably lower making passage much more difficult.

In addition, one of the benefits of the prebate is to make the FairTax into a progressive tax that does not punish those at the low end of the scale. This not only helps the low income groups but removes one of the big political arguments that have always been used by opponents of ANY tax reform - that it punishes "the little guy". Make no mistake, that is important in bringing the FairTax into law.

Also, the prebate has the very real benefit of ensuring that all pay a share of taxes and at the same rate while protecting those on the low end of the scale. That becomes important in helping most people begin to realize how much they are actually paying in taxes now. This should help in any grassroots effort to get Congress to reduce spwending once the bill becomes law. The prebate is not without cost to those receiving it since each must pay tax as does everyone else. This means that, particularly, the low income families will notice that their income (including the prebate) is reduced by government taxes. With a true welfare handout, there is no such pain - and believe me it WILL be pain for the low income families paying it as compared to having the money and NOt paying tax as with a real welfare plan. The FairTax is not welfare and it is not free else the tax effect would not be noted.

"Necessities of life" ... ah, yes - what are those? It seems that they are different things to different prople, I can think of no good reason why the government should be allowed to mandate those by declaring certain things exempt or tax favored for everyone. It is much more in line with the desires of the public (and freedom and fairness in general), I think, to have each taxpayer decide what his necessities might (or might not) be. The prebate accomplishes this very nicely.

All receive the prebate and all will notice the portion taken by the government for its endless spending binges. While an increased tax rate might result in a slightly higher prebate it is not a linear increase and, overall, those on the low end would most likely be more badly affected than those higher on the income scale since such increases tend to raise price levels. Also, an increase in the rate affects all taxpayers not just those on the low end of the scale and it would be the injudicious congressman, indeed, who pushes for something so contrary to the wishes of most of his constituents. Any FairTax rate increase would be bitterly contested by a large portion of Congress, I think. Even if the rate were increased (and it is not an automatic thing as some would have you believe) there comes a point where higher rates bring in LESS money for the government - which is one of the interesting characteristics of a sales tax. Even some of the founding fathers knew this as one of the benefits of such a tax.

We'll just have to have a differing view on the prebate since I think is accomplishes a good deal and is, overall, a good thing.