I think there's something we need to clarify. You originally said the $10,000 person was paying $2,200 in taxes presently due to the embedded taxes. That's not really the case.
He is paying $2,200 in higher prices CAUSED by taxation but paying no tax. That's a big difference. Presently the taxpayer is paying no tax while under the FairTax he would be receiving the $2,141.30 prebate (2004 data) and if he spent his entire income for consumption he'd be buying about what he now does but would be paying $2,300 in sales tax while doing so (prices would fall, sales tax would raise them back to some level).
This would actually increase his net tax paid from $0 to $158.70 which, while small, perhaps, to some would be noticeable to him no doubt and would represent a share of federal taxation he does not now pay. It is in no respect, however, a windfall.
IOW, I don't think it's correct to believe those at the poverty level pay taxes because they are the victims of higher prices (as are we all) CAUSED by the income tax. And it is not really welfare since they must now pay the sales tax as the same rate as you, I, or Bill Gates.
I believe it is, in fact, a very good solution to a difficult problem of regressivity. The FairTax is the only plan on the table that actually taxes everyone to help pay for this overblown government. Once that is in operation and people see clearly what "our" government really costs us, I believe there will be far more grassroots pressure upon Congress to begin to reduce spending - precisely because even the $10,000 income person is paying along with the rest of us ... and is not doing so now.
Raising the FairTax rate would not be so easy as you might think since ANY change affects all taxpayers. The $10,000 man may think he would be helped, but if he did much figuring he'd see that he is already above the level for the prebate to pay all his sales tax and he would be contributing even more to the federal coffers. Hamilton even knew that there was a point beyond which raising sales tax rates actually reduced the amount of government revenue.
I understand what you mean. You mean he currently doesn't SEE HIMSELF paying a tax, but the FairTax will feel like a tax because he is the one paying it directly.
I generally think of taxes as :
The difference between "value" received and income earned.
Maybe this is just because I have gone through the excercise many times of adding up all the hidden taxes I pay and figuring the real (untaxed) value of what I buy.
If we agree that $10,000 only buys $7,800 in "value", then $2,200 was used up by taxes.
If we consider the same person as having had 7.65% Payroll taxes witheld from his income, then he is only able to spend $9,235 and only receives $7,203 in value. $2,800 was paid in taxes.
Under the FairTax at 23%:
1) Income increases to $12,141
2) Receives 77% of spending as "value" which is $9,349
3) $2,792 went in taxes
If the FairTax was proposed to increase to 30%
1) Income increases to $12,792
2) Receives 70% of spending as "value" which is $8,954
3) $3,838 went in taxes
If the FairTax was proposed to decrease to 17%
1) Income increases to only $11,582
2) Receives 83% of spending as "value" which is $9,613
3) $1,969 went in taxes
That makes me feel better. He does have an incentive for lower taxes. My math was wrong before. I don't know what I was thinking.
His buying power goes up as the rate goes down (yea !!), which means the lowest possible rate that raises the necessary revenue benefits him most. I hope he is smarter than me and can figure that out instead of just voting for the larger Prebate check.