Econjack, I agree. I’ve tried to read as much as I can find on the Fair Tax. I am in support of the concept, but that ‘prebate’ silliness just smells like something that future congress critters will be likely to ‘tweak’ for their own aggrandizement.
I would much rather see a smaller applied rate, and dispense with this element of the plan.
Only other big concern is the protection needed for those of us approaching our sunset years and finding ourselves likely to be more dependent on SS than we otherwise have been planning. Not really sure what needs to be done, but we need some sort of protection, I think.
The first criticism about a sales tax is that it is “regressive”—It takes a larger bite out of the “poor” than those of more means. The prebate makes the tax non-regressive. The feds use their definition of poverty income to establish who is “poor”. It is less than $29,000 for a family of four now.
Since NO ONE is required pay tax on spending below the poverty level income, everyone gets a monthly prebate for poverty level spending. I get one, you get one, Warren Buffet gets one, and Warren Buffet's secretary gets one. There is no income test to get a prebate. We do need to tell them who is getting the prebate and where to deposit the refund. Prebates, I believe, would go to only legal residents.
This makes an effective tax rate of zero percent for the “poor”, 11.5% for a $58,00 income, and so-on.
So the “prebate” is merely a refund of tax paid but not owed.
And yes, we would need to watch Congress and object if they try to mess with it. This is true for any legislation. At least an increased prebate for some people would be more visible than the buried tax loopholes in use now.
I agree with you two that the prebate is a sticker.
My preference is by far to reduce the rate and eliminate the prebate - as I would presume the FRopulation would. IIRC it would cut about 3% off the rate.
As for those approaching retirement - I have more in tax deferred plans so I’ll do well. But those who have more in after tax savings will not. My suggestion has been to credit after tax savings in just the way they credit after tax inventory [the inventory credit was added due to public suggestion btw.]
In any case, the nrst is miles better than any income tax and I support the nrst with its warts.
I want us all to pay the exact same marginal rate. I want us all to feel the full, unhidden burden of government equally.