How the FairTax Will Renew America

By Remember_Salamis (Nicholas G. Bradley) Citizens for a New Contract with America

We must replace the income tax with a national retail sales tax (NRST), also known as the FairTax. This can be accomplished by passing the Fair Tax Act of 2003, known in the House as HR 25 and in the Senate as S 1493. The FairTax would replace all income and payroll taxes for both individuals and businesses with a tax-inclusive 23% NRST. Only goods and services purchased at the retail level would be taxed, while all goods and services purchased by businesses would not be. Because taxes will only be collected at the sales counter, there will no longer be any capital gains taxes on savings and investment. In order to ensure that we don’t end up with an income tax and a NRST, we must also repeal the 16th Amendment. The following is a synopsis of how the FairTax will work and how it will affect each aspect of the economy (sectors of the economy that are covered elsewhere in this document will be covered briefly):

The idea of a NRST has been around for a long time, but not in its current form. The old theory of a NRST would tax all consumption, which resulted in an unfair shift of the tax burden towards the poor; lower savings rates among the poor meant that they consumed a grater portion of their income, resulting in a regressive tax structure. However, the new Fair Tax plan only taxes excess consumption. Under the FairTax, all Americans would receive a monthly rebate based on the poverty level established by the Department of Health and Human Services (HHS), which is currently $9,310 for each adult and $3,180 for each child. These numbers reflect what is needed to “get by” in America. Under the FairTax, these numbers would translate into the Basic Consumption Allowance (BCA). Every American household would receive compensation that amounts to 23% of their BCA every month, regardless of income. It would be similar to the progressiveness of the current system, where every American pays 0% in income taxes on the first nine or ten thousand dollars they earn.

A family of four will receive a check for $445 dollars every month to cover taxes on their basic consumption needs. Therefore, every household in America below the poverty level will pay a 0% (or less) tax rate. However, this is only if they spend 100% of their money on retail items. If the same family, which brings home $24,980 (exactly at the poverty line), cuts back on retail spending by just 10% and consumes only 90% of what they bring home, they would pay an effective tax rate of negative 2.3%! If they consumed only 75% of their income, they would pay a tax rate of negative 5.7%! The FairTax will, in effect, un-tax the poor.

Despite massive subsidies, America’s farmers are still hit very hard under the current tax system. All taxes come down hard on independent farmers, including the payroll/self-employment tax, the alternative minimum tax (AMT), the estate tax, and the capital gains tax. These are the reasons why the American Farm Bureau Federation (AFBF) has decided to make passage of HR 25 one of its top priorities. The FairTax would get rid of all of the red tape and undue taxes exacted on American agriculture and allow farmers to concentrate on what they do best: farming and ranching!

Almost all farmers are self-employed. As a result, they must pay the full burden of the payroll tax, which is 15.3%. Employed workers, in contrast, pay only half of the burden, only 7.65% (employers pay the other half). With the average farm-operated household making $60,000, this family of four would only pay 13.42% in taxes under the FairTax if they consumed 100% of their income. That’s less than they already pay in just payroll taxes, not including the 10 -15% marginal rate in income taxes (depending on deductions). The FairTax would therefore cut taxes on farmers by at least 50%. In reality, however, most farming households aren’t big consumers, growing much of their own food and saving a lot. The Farmer’s true tax cut could be over 75%!

The income of many farmers varies year-to-year because they rely on delayed payment programs for goods. Under the current tax system, they must account for the income when the sale is signed, even though they don’t have the money yet. Therefore, even though a farming family may take home much less, their reported income will be much higher, subjecting them to the AMT.

Family farms are hit hard by the estate tax, making it nearly impossible to pass down a large family farm. What’s more, if a family decides to sell the farm after 50 or so years of operation, they are hit with the capital gains tax if they decide to sell it outside the family. This is made worse by the fact that after adjusted for inflation, American farmland has not appreciated very much since the 1960s.

Seniors, like the poor, will be effectively un-taxed by the FairTax. However, they could potentially get even more benefits if they’ve had a long history of saving. Under the current system, seniors pay taxes on the investments they’ve built over their lifetime. Seniors are currently paying dividend taxes on withdrawals from their retirement accounts, which they would no longer do under the FairTax.

The poorest of seniors, those relying solely on Social Security, will pay less than 3% in taxes after their BCA rebate. Furthermore, middle and upper-class seniors won’t have to pay taxes on their social security check, which many do now and can reach rates as high as 50 to 85 percent.

Many seniors downsize to smaller homes after retirement in order to take advantage of the equity built up over a lifetime. Under the current system, a single senior could only deduct up to $250,000 ($500,000 if married) from their capital gains when they soled their home. Many of these seniors bought their homes for a few thousand dollars in the 1950s, but are now worth hundreds of thousands of dollars. Under the FairTax, these seniors can collect all of the benefits from the sale of their homes. Since the estate tax will be eliminated, seniors would also have the option of passing on their possessions to their loved ones instead of selling them, if they wished to do so.

Education will be much more affordable under the FairTax because the NRST will not apply to education costs because it is a type of investment. Therefore, all dollars spent on education will essentially be pre-tax dollars.

Americans must earn anywhere from $12,000 - $15,000 (depending on the tax bracket) to pay for $10,000 of tuition under the current system. However, $10,000 of tuition would cost $10,000 under the FairTax. Since there are no more capital gains taxes there is no more need for tax-free education accounts. Families can save money for general purposes, whether it’s for a new home, a new car, retirement, a vacation, health insurance deductibles, or a college education. Hidden taxes will be stripped out of the cost of goods and services in all industries, resulting n a 20 – 30% drop in price. But since the NRST will not apply to education, the 20 - 30% lower price will be passed directly on to consumers.

Although not widely noticed, some of America’s poorest are college students putting themselves through school. Most of these students are below the poverty line, and would consume very little outside of their BCA under the FairTax. In fact, some students would pay negative taxes. For example, a student is working part time (20 hours/wk.) as a waiter making $6.25/hr. That puts him at $6,000 a year and below his BCA. As a result, his monthly BCA check is more than what he spends on sales taxes. As a result, he pays a negative tax rate, in this case -12.68%. After factoring in taxes he pays under the current system (just the 15.3% payroll tax since the student is below the poverty line), this independent student would have 1/3 more money in his pocket ($563.44/mo. compared to $423.50/mo.) under the FairTax, and that’s if he consumes 100% of his income! Keep in mind that education expenses would not be taxed.

Education will be much more affordable under the FairTax because the NRST will not apply to education costs. After all, it is a type of investment. Education would be 100% tax-free and costs would drop 20 – 30% as well, just as they will in every other industry. Also, independent students, many of whom are the poorest in this country, would essentially pay a negative tax rate.

The US is the only nation in the world, other than Libya, that taxes businesses at home and abroad. As a result, the US is losing millions of manufacturing jobs per year. While “outsourcing” is natural (and needed) to a certain degree in a free-market/free-trade system, we are hemorrhaging excess jobs. On top of that, American manufacturers are unable to compete with cheap, untaxed imports at home. Under the FairTax, however, the US will become the most attractive industrialized manufacturing country in the world and our rusting industrial base shall be revitalized.

As stated earlier, 20 -30% of the price of goods is due to imbedded or “cascaded” income, payroll, and corporate taxes. After elimination of these taxes, the cost of US goods will drop accordingly, making US-manufactured products much cheaper. While at home these items would be subject to the new 23% sales tax, making them roughly the same price they were before the implementation of the NRST. When those items are sold overseas, however, there is no such NRST. As a result, our goods are 20 - 30% cheaper. American manufacturers would have a huge advantage over our “peer” competitors, namely Canada, Western Europe, Japan, and to a certain extent South Korea.

Domestically, American manufacturers would gain a massive advantage over imports. Since the US would be the first nation on earth to eliminate income, payroll, corporate, and similar taxes (also known as value-added taxes, or VATs), foreign goods sold in the US would suffer an unofficial 23% tariff from the FairTax. While the price of US-manufactured goods would drop 20-30%, foreign goods would not.

Capital investment in the US would skyrocket due to the elimination of the Capital gains tax. Foreigners would find the tax-free US capital market as the #1 place for investment dollars as well.

The US health care system is the most inefficient in the industrialized world, spending over 15% of GDP on it, compared with only half of that (7.4%) in Japan. That’s over $5440 for every American! While we spend so much, we receive so little: the Japanese life expectancy is 4 years longer (80.2) and their infant mortality rate is 2½ points lower. However, there are many causes to our inefficient system, ranging from a lack of competition, to high insurance costs, to the poor application of the information technology revolution in the field of medicine. Like many of our nation’s problems the answer lies in scrapping the income tax.

After implementation of the FairTax, all forms of corporate welfare will be eliminated; corporations will no longer receive tax breaks for giving employees health insurance. As a result, companies can either negotiate with healthcare providers for a lower price, let employees pay for their own health insurance, or provide nothing. Although some would keep their current benefits system, most would decide to give their employees extra money in their paycheck and let them pick their own health care plan. It is highly unlikely that companies currently offering benefits would choose to do neither.

Disgruntled employees would either reduce productivity or quit and cost a lot to replace. The new system would be consumer-driven, with cost-conscious consumers making their own decisions for their own well-being. Just like employers have moved from the unaffordable “defined pension plan” to the affordable 401(k), so too will employers soon shift the burden of choice to their employee.

Here’s one likely scenario: company (A) has 1000 employees. It costs $500/mo. for each employee’s health insurance. Under the current system, the company writes off $6M on its taxes each year for providing health insurance to its workers. As a result, the company saves $2M in taxes a year (at a 33.33% tax rate) by deducting the health coverage from their taxes. Over the past few decades, employees have used this tax break to pass on potential higher wage to their employees in the form of bigger health care plans. Under the FairTax, Company (A) would no longer receive a $2M tax break. As a result, the company can either spend an additional $2M a year on health insurance or pass on the remaining sum, $4M, onto its employees at a rate of $333/mo. per employee. This is the most likely option because it’s the cheapest for the company. The employee now has $333 to go and find health coverage in the open market. Of course, they could always provide no coverage but that would be like giving your entire company a pay cut. The employee now has $333 to go and find health coverage in the open market. Insurance carriers will compete for his business driving down prices while allowing the employee to choose the plan that works best for him and his family. Future wage increases would show up in their paychecks, not in the form of bigger health care plans.

Under the current system, the price of goods and services are inflated 20-30% due to imbedded taxes. After implementation of the FairTax, this would go away. With a drop in price of 20-30%, US drug makers would be able to sell a lot more drugs overseas (the drop in prices would essentially be replaced by the FairTax on drugs sold in the US). There is strong evidence that US drug makers are supplementing depressed profits overseas with higher drug costs domestically. This is due largely to hefty price controls imposed by socialized healthcare systems overseas and America’s brutal corporate tax rate on American exporters (the US is the only nation that taxes profits made overseas as well as domestically). Bottom Line: increased profits overseas will probably cause prices at home to drop.

There is very little cost awareness among insured consumers of health care services. If the cost of consuming a good is relatively low, consumers will generally consume more of them! This is especially true if a consumer gains little financially from minimizing their consumption. This is precisely the case in the healthcare industry, and it should be fixed by making American consumers, already cost-conscious in other facets of life, become cost-conscious about healthcare costs. This can only be done by making consumers pick their own healthcare plans.

Americans should choose the policy that best fits them. Some individuals might decide to purchase high deductible policies, minimize their use of health care, or countless other decisions. Introducing more aggressive price competition to the health care marketplace will lower prices and give consumers more “bang for their buck”. Eliminating employer motives to give employees a “cookie cutter” health plan by eliminating the tax advantage of doing so will go a long way towards opening the market up to competition.

The FairTax will cause wages to rise. Multiple reasons, from the removal of the payroll tax, to the abolition of capital gains taxes, to an increased inventive to work will all cause wages to raise. The most important cause of higher real wages is a higher level of capital investment per worker. Due to more investment, wages will go up. Also, there will be more motivation to work because there will be less penalties for doing so.

There is a 97% correlation (inflation-adjusted, of course) between capital investment per worker and their wages. A worker is more productive if he has more machinery and equipment to work with, particularly new equipment that incorporates the latest technological innovations. Higher productivity leads to higher real wages. It is impossible, on a sustained basis, for an employer to pay workers higher wages than their productivity justifies because employers that did so would go out of business. Under the FairTax, capital investment will skyrocket due to the abolition of the capital gains tax.

Under the FairTax, the income of some people will increase because they will find working more attractive in the absence of income and payroll taxes, and they may choose to work more or at a second job. Others may choose to work less because they are making more money per hour worked, and it is easier for them to meet their personal financial goals.

Since capital gains taxes will be abolished, the cost of borrowing money will also drop. A 25-35% drop in interest rates is expected after the FairTax is implemented. The reason for the drop is because lenders will no longer tack on a 25-35% surcharge to cover the taxes they will have to pay. This can be seen today in tax-free bonds, which are typically 30% less than their taxable counterparts.

With interest rates at their current 6% rate, a 30-year, $300,000 mortgage would cost $1,800/month. While that’s excellent historically, under the FairTax system that same mortgage would only cost $1,200/month (a 4% rate). In essence, the FairTax would increase home buying power by 50%! However, not just homebuyers would benefit. The FairTax will lower interest rates and increase the capital available for business investments. As a rule of thumb, the lower the interest rate, the larger the pool of capital. The “true” value of a corporate stock or bond is fairly simple to calculate: it is the expected future income from owning the asset plus the interest rate. If a firm's expected future income stream increases, then the stock will increase in value. If a firm's expected future income stream goes down, then the stock price will fall. If the expected future income stream from a bond declines due to a heightened risk of default, then the price of the bond will fall. When interest rates rise, the present value of the corporation's future income declines and stock prices decline. Since interest rates will be lower, stock and bond returns should rise accordingly. In addition, the FairTax will dramatically increase investment levels because savings will no longer be discouraged.

The US has lower rates of capital formation and savings than most of its major trading partners, including Japan, Germany, France, the Netherlands, Italy and Canada. This is due to the current tax system, which discourages savings and investment by taxing capital gains. Under the FairTax, the more somebody saves, the lower their effective tax rate is. Therefore, savings and investment will increase. Furthermore, capital gains tax would be repealed, encouraging even further investment.

Under the FairTax, corporate bonds and municipal bonds would be treated equally by the tax code. Currently, corporate bond rates have a higher interest rate because they are taxed and the risk of default is higher. Municipal bonds (or MUNIs), on the other hand, have lower rates because they are not taxed and the risk of default is lower. As a result, high-income individuals invest in tax-free municipal bonds while low and middle income individuals invest on corporate bonds. The bond-neutral FairTax will let bond investors invest in corporate bonds or municipal bonds, depending on the individual investor’s risk tolerance. Bondholders will shift more assets towards corporate bonds, which will benefit the private sector at the expense of the public sector. As a result, government will find much harder to raise funds because there’s less money being thrown at after tax-free MUNIs. However, the private sector will find it much easer to raise needed capital. Last year, the President passed a cut in dividend taxes. The purpose of this was two-fold: (1) to increase the appeal of investment, and (2) control corporate malfeasance by promoting dividend options. While the move was much-needed, corporate malfeasance on the Scale of Enron, Tyco, or MCI WorldCom will be nearly impossible under the FairTax. Under current law, the recipient of dividends is taxed three times. First, a shareholder must purchase the stock after taxes. Next, the company must pay corporate taxes. Third, the dividend holder must pay taxes yet again on dividends. As a result of triple taxation, many companies prefer not to offer dividends because it’s simply another layer of taxation. Instead, companies keep the money internally and pass on profit growth in the form of increased share prices. However, this can lead to stock manipulation, such as Enron, where the company “fudged” the numbers in order to make the share price rise. Under the FairTax, this would not be possible because profit growth would be directly passed on to shareholders, not stuffed away in some dark corner of the company. Simply put, dividends are the best evidence of a healthy business. You can't fake a dividend; it's hard cash.

A NRST would be a more stable source of revenue than the current income tax system. Consumption, over time, is a more stable source of taxation than income. When income falls or even ceases, people borrow, dip into savings, or rely on gifts to maintain consumption levels. Similarly, when income is unusually high, people tend to either to pay down existing debts, or to save more. It is indeed preferable to have a federal tax base that is relatively stable.

A stable tax base gives rise to smaller variations in government revenue over time. A steady flow of revenue allows the government to more effectively budget and more easily avoid running deficits.

Under today's income tax system, tax evasion is a major problem that is only growing. According to the General Accounting Office, 22 - 23% of all taxes are unpaid. Under the FairTax, this number would drop significantly. Furthermore, income made in the underground economy, including criminal activity, will be effectively taxed. Under the current income tax regime there are over 154 million income tax filers and any one of them can cheat on their taxes. Under the FairTax, there would be no more than 19 million tax filers. But, there would only be 19 million tax filers if every business in America sold retail goods. In reality, the number would probably be much lower. As a result, tax collectors can focus their attention on fewer filers.

As long as there are taxes, there will always be tax evasion. However, the FairTax minimizes tax evasion. Only retailers will pay taxes, but only a fraction of retail sales would be prone to evasion: retail sales from small businesses.

Small businesses are viewed as more likely to evade taxes since the owner, and beneficiary of tax evasion, is more likely to also be responsible for keeping the books and filing the tax returns. According to the Joint Committee on Taxation (JCT), small firms account for less than 15% of gross receipts by all retailers, wholesalers and service providers. Therefore, the number of tax filers prone to evasion would be extremely low. Under the income tax, retailers only have to misstate sales just enough to wipe out sales profits in order to evade 100% of his tax bill. Under the FairTax, a retailer would have to hide all of his sales in order to evade 100% of his tax bill, which is simply not possible. Since the payoff for evading taxes is much smaller under the FairTax, the motivation to evade taxes is much lower under the FairTax.

Under the current tax regime, it is extremely difficult, if not impossible, to track cash transactions. Cash transactions include “under the table” business deals, person-to-person cash transactions, and criminal activity. Currently, these transactions are 100% untaxed. Under the FairTax, however, it won’t matter how you make your money, just how much of it you spend. In fact, the number of these cash transactions will decrease because there will be very little motive in doing so: there are no income or payroll taxes!

Example 1: The Drug Dealer – A young man selling crack cocaine makes $100,000 a year from doing so. Under the current system, he pays $0 in taxes. Under the FairTax, however, he would pay 23% in taxes on all goods he bought. And since most drug dealers spend their money on material items, his marginal tax rate would be near or close to 23%.

Example 2: A Waiter/Waitress – Although tips are supposed to be reported as income and taxed, in reality most are not. Under the FairTax, it doesn’t matter if the waiter made his money from his salary or his tips, just that he made money. As a result, all of his tip money is taxed (unless he saves it or uses it for college).

Example 3: An Illegal Immigrant Worker – Currently, it is extremely lucrative to employ illegal immigrants because they essentially work tax-free and are paid under the table. Under current law, an illegal being paid $10/hour in cash is equivalent to a legal worker being paid anywhere from $12-14/hour (15.3% in payroll taxes plus whatever the marginal tax rate is). Under the FairTax, it won’t matter; both workers would make the same because there are no taxes. And since there are penalties for hiring illegal immigrants, employers would naturally choose legal workers if there is no price difference. In addition, the illegal worker would not receive a monthly BCA because he has no Social Security number, making life in America much harder. As a result, there is a much larger incentive to migrate here legally and a large tax burden for migrating to the US illegally.

Retailers, those who will be collecting and filing our nation’s taxes, will strongly benefit from the FairTax. Besides benefiting from the elimination of the income tax, payroll tax, and capital gains tax (which will boost profits, lower costs, and spur investment), retailers will directly benefit from the economic changes brought upon by the FairTax.

Many people refinance their homes or get home equity loans to pay for new cars, boats, home improvements, and consumer items. Since interest rates are expected to drop 25-30% after the FairTax, there will be a “mad dash” to refinance and get home equity loans, just as there has been in recent years due to lower interest rates. With more money in their pockets on a monthly basis, consumers will consume more. A flood of home equity loans will give a short-term jolt to consumption, which could temporarily dip if it takes time for hidden taxes to work themselves out of the system.

Just as home loans will drop because of the FairTax, credit card interest rates will drop as well. With credit card rates hovering around 20%, consumers will high credit cars debt will benefit greatly from reduced monthly payments, allowing them to spend more. Most studies on the FairTax estimate that the FairTax will result in massive economic growth in the first 10 years of the FairTax, with consumption growing along with it.

Only goods and services purchased at the retail level would be taxed, while all goods and services purchased by businesses would not be.

Both my wife and I operate sole proprietorships. Most of our supplies are not purchased wholesale, because we are the end user. So do our small businesses get stuck with the tab?

Just roll the Fedgov back to its Constitutional limits and we won't need to pay much out in the first place. (and not that bogus interstate commerce clause bit, either.)

"The old theory of a NRST would tax all consumption, which resulted in an unfair shift of the tax burden towards the poor; lower savings rates among the poor meant that they consumed a grater portion of their income, resulting in a regressive tax structure. However, the new Fair Tax plan only taxes excess consumption."

If this clause is part of it, I will oppose the NRST. "Taxation" as "life handicapper" is bullshit. The ONLY purpose of ANY taxation should be to finance necessary government functions. ALL citizens should pay an equal PERCENTAGE of their income. If you want to "benefit the poor", then do as the states currently do, and exempt food and medicine from the sales tax.

I scanned this thing, rather than reading it. It gives the impression of being well written and thought out at least fairly well but also - well, long.

I hate to criticize what is obviously a labor of love, but I think you need a summary for those of us who haven't studied all the ins and outs of this issue.

I don't doubt that the tax code is a terrible mess and an opportunity for serious improvement in our economy. The only issue to me is whether those improvements, and any advantage to civil liberties as adduced by Alan Keyes, are worth the additional political capital over and above what would be required for a flat tax. Because you are proposing a constitutional amendment as part of your package; that's a lot of heavy lifting and the politics of that cannot be simply wished away.

>>ALL citizens should pay an equal PERCENTAGE of their income.

Why?? Why should people that make more money have to have more of it stolen by the government simply because they have earned it? Where do you get the right to claim other people's money?

"So you believe that citizens should be punished for what they produce?"

"Why should people that make more money have to have more of it stolen by the government simply because they have earned it?"

So both of you prefer the current "progressive" taxation scheme in which those who make more money pay a HIGHER PERCENTAGE than those who don't???

Retailers, those who will be collecting and filing our nation's taxes, will strongly benefit from the FairTax. Besides benefiting from the elimination of the income tax, payroll tax, and capital gains tax (which will boost profits, lower costs, and spur investment), retailers will directly benefit from the economic changes brought upon by the FairTax.

My downtown hardware store (with it's 2% margin) will turn into a museum. The financial incentive for Lowes to bulldoze a stretch of woods 5 miles out of town will increase. There won't be any more stores selling ammo in town.

Those are all negatives or positives depending on your social philosophy.

Here we go again.

To all you who oppose the Fair Tax, here is the summation of the core issue in a nutshell.

CONTROL.

Taxing income requires an invasion of every individual's personal records. Taxing consumption, on the other hand, requires a collection at the point of every eligible transaction. (not used items, even houses.)

The system which taxes income is the tool of intimidation which the control freaks in the government use to their advantage, and our subjugation. The IRS keeps us all in a state of perpetual jeopardy, with courts that operate completely outside the authority of the Constitution.

All things being equal, (and the FairTax is a revenue neutral plan) taxing consumption is better for our individual freedom.

We can all get bogged down in the minutiae of the competing plans, but NOBODY, even the usual gang of naysayers, has yet so much as challenged me on this point.

Have a nice day.

So both of you prefer the current "progressive" taxation scheme in which those who make more money pay a HIGHER PERCENTAGE than those who don't???

No, the fairtax alternative is to pay taxes on what is spent. see my post #12 for why this is better.

My downtown hardware store (with it's 2% margin) will turn into a museum. The financial incentive for Lowes to bulldoze a stretch of woods 5 miles out of town will increase.

Huh? Since purchasers at the local hardware store and Lowe's will both pay the same tax rate, why would Lowe's have any more competitive advantage than they already have?

Furthermore, middle and upper-class seniors won’t have to pay taxes on their social security check, which many do now and can reach rates as high as 50 to 85 percent.

Sorry, that's factually incorrect. Seniors pay taxes ON 50-85% of their social security check, not taxes OF 50-85% of their SS check.

The local HW store doesn't have cash to ride out the transition, nor can they get loans. All they have is inventory which will be worth 15 or 20% less overnight. OTOH Lowes will have a much smaller relative loss since their inventory is a lot smaller percentage of their worth.

So both of you prefer the current "progressive" taxation scheme in which those who make more money pay a HIGHER PERCENTAGE than those who don't???

===

LOL.. Did you even read what I posted?

If I said people shouldn't be punished for what they produce, what in the hell would make you think that I support the current system?

Re-read each of our posts, and re-read what you posted.. You clearly aren't on the same page as us.

Huh? Since purchasers at the local hardware store and Lowe's will both pay the same tax rate, why would Lowe's have any more competitive advantage than they already have?

===

Huh?

Lowe's would have overwhelmingly more purchasing power against the local hardware store.. but would they have more purchasing power against Home Depot?

The only drawback to this plan is that in order for any new tax plan to work the gov't must stop spening money like drunken sailors on shore leave.(sorry o all you Navy vets). I have always advocated the NRST so it gets the govt out of my paycheck and kills the Gestapo like tactics of the IRS. My concern is that if you give politicians revenue they will spend all of it and more.

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