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I went back to the fairtax.org site & reread the prebate info. You are right! Income & wealth are NOT considered in the prebate. My Bad. Somehow, what I read several months ago suggested the error in my thinking.

But, I still contend that the prebate will be the political football. 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. The gov’t statistics used to justify the prebate will simply be manipulated to generate the “desired” result.

I also read the weak arguments against sales tax exemptions. The army of lobbyists and special interest groups mentioned are lobbying to lower MY purchase cost, & that is a GOOD thing! The pols are between a rock & a hard place. To grant a new exemption, they have to take it out of their OWN bureaucratic pocket - less taxes mean less to spend or a bigger deficit. Pols don’t like to cut taxes, especially liberal ones.

And the nonsense about the rich gaining more benefit from exemptions is a laugh. The rich eat filet mignon, the poor eat 80% lean “hamburger”. The rich buy a new car every year, the poor buy used cars (no tax) every 10 years. The rich fly first class, the poor take the bus. The rich shop at the “Gucci” stores, the poor at Walmart. The rich get hair transplants & a face lift, while the poor get a baseball cap.

As for the number of paper checks - that is the least of it. Getting the amount right, & to the right person is the problem. Thousands of people are born & die, marry, divorce, change residence, & reach age 18 every month. We are gonna have to notify the gov’t EVERY time something occurs in the family that might affect the prebate. That is probably a bazillion changes a year. Tracking these changes & sending the right amount to the right people will make the current IRS processing of YEARLY refund checks seem like perfection. And the people that will suffer the most are the poor who desperately need that missed check.

Why does the FT contain such a bureaucratic pig as the prebate, when sales tax exemptions are far easier to administer, & common sense tells everyone they are fair because they apply to everyone equally?

The prebate is “of the bureaucrats, by the bureaucrats, & for the bureaucrats”.

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."

Why does the Fair Tax have a prebate?

Well, that was my first thought too. Why not simply exempt necessities? There are several reasons the bill was structured this way:

1. The Fair Tax taxes EVERYTHING, exempts NOTHING. That removes the influence of lobbyists on the system. Since there are no exemptions, there will be no reasons for lobbyists to troll the halls of congress with suitcases full of campaign cash.

2. The Prebate effectively exempts a specified level of spending per individual. This gives the individual the greatest personal freedom in selecting his or her market basket of essentials. Stated differently, my market basket of “essentials” is probably not the same as your market basket of “essentials.” If the government controls what is or is not an “essential” one or both of us will probably have to modify our choices to that which the government deems an essential——Hamburger vs. Hot Dog, Fresh Green Beans vs. Canned, low-fat “X” vs. Full Fat “X”, etc. Allowing the government to choose the “essentials” would create a huge opportunity for guiding and directing us to choices they deem worthy. NO THANKS. If I want butter on my table instead of margarine, I should be able to buy butter tax free.

3. Exempting “necessities” will reduce the tax base and drive up the rate. Allowing individuals to choose allows the base to remain as broad as possible, thereby keeping the rate as low as possible.

Hope that helps to clarify why the prebate method was chosen over the exemption method.