[taxcontrol]

Simple understanding of how it is IMPOSSIBLE to apply the Fair Tax as stated.

Example:

Propane deal sells 1,000 gallons of propane to a farmer. The propane is used to:

heat the house - retail consumption
heat the barn - component expense to the final product or wholesale consumptions
drive the tractor - wholesale expense
drive the family pickup - both retail and wholesale

If the propane vendor taxes the propane the tax becomes a VAT. If he does not, it is a consumption tax that never gets collected. There are easily a dozen or more examples of how something that sounds simple, is not understood until you think through the problems.

Also ...

Under the Linder-Chambliss bill, the federal government would have to pay taxes to itself on all of its purchases of goods and services. Thus if the Defense Department buys a tank that now costs $1 million, the manufacturer would have to add the FairTax.... The tank would then cost the federal government $300,000 more than it does today, but its tax collection will also be $300,000 higher.

Likewise, Similarly, state and local governments would have to pay the FairTax on most of their purchases. This means that it is partly financed by higher state and local taxes.

That means when you purchase services, you will pay for the basic cost of the service, from the city, plus the Fair tax on that service. Included in that basic cost is the tax cost that the city had to pay. So you are paying taxes on taxes ... the classic definition of a VAT.

[Mister Da]

If business-to-business transactions are not taxed, then business-to-gov’t transactions can be exempted as well. It is absurd to collect federal sales tax from the fed’s.

Businesses such as farmers have been parsing their expenditures for income tax purposes for years. In your propane example, fuels used to heat the house or power the family car are not business expenses, while the farm related gas usage is fully deductible as a business expense from income before taxes are calculated. The IMPOSSIBLE you mention has been done by anyone who drives a company car. It is a pain in the butt, but is done every day.

I don’t believe any sensible proponent of the Fair Tax will tell you it is PERFECT, or without flaws. If you read my other posts here today, you will see I have a MAJOR problem with the PREBATE. But, I do believe the FT (substituting tax exemptions on food, meds, etc. for the prebate) is a smarter, fairer, & less corruptible method of financing the Federal Gov’t.