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Another very good explanation....

Well, if that's a good explanation, then it's clear this thing called a 'Fair Tax' is not at all what's being claimed. .

The specific example is not a sales tax at all! It's an income tax. It happens to be a flat tax of 28%, rather than a graduated income tax, but it's still - as the essay explicitly states - a tax on income taken from your paycheck, not a tax on any sale.

And there is an even greater flaw. I'll buy that all taxes are ultimately sales taxes. Certainly the consumer pays all taxes. But the issue is not and never has been where the total sum of taxes come from. The issue is the distribution of how the total burden is applied. Right now, if one assumes that the nominal pay is 'right' in some sense of value rendered to the organization, then the burden of taxes is higher on higher incomes. If one went to the flat income tax this essay really advocates, then it would either amount to a pay increase for upper brackets and a penalty to lower brackets, or salaries would need to be adjusted so that take home pay remains the same, in which case the only real difference is semantics.

The real problem is that there is any tax on income at all. It sends the wrong message - that the official government policy is to penalize people for providing services others are willing to pay for. Instead, we should have a true 'sales' tax, collected at point of sale of some good or service someone is willing to pay for. In the end, labor can be considered such a service - and after all, the true source of tax revenue is always the consumer - but if it's treated exactly the same for federal tax tax purposes as every other sales transaction, the proportion of the total tax burden collected for providing a service someone is willing to pay for would go down, and that's a good thing.

I think you mis-read the article. The NRST/FairTax is indeed a sales tax -- it is imposed/colelcted at the point of retail sale. If you choose to save or invest part of your paycheck, you would pay no taxes on it.

Neither is the NRST inherently unfair or regressive. Not only, as you mention, are most people already paying a hidden sales tax in the form of increased costs to production, but the NRST actually provides a mechanism to offset the amount of the sales tax paid on purchases up to the poverty line under the assumption that necessities should not be taxed. While this leaves everyone's marginal tax rates identical, it does make the effective tax rate progressive based on amount of consumption.

For example, let's assume the poverty line for a family of four is $14,000. A family spending $15,000 would be paying a 23% marginal rate on each dollar spent in the sales tax, but their effective tax rate, after the rebate is factored in, is only 1.5%. A family spending $30,000 would be paying a 23% marginal rate on each dollar spent in the sales tax, but their effective tax rate, after the rebate is factored in, is 12.3%. At $100,000 in expenditures, the effective tax rate becomes 19.8%.

It's not really an income tax, since you don't pay it on what you save. But you're both right. There are 260M people in the US and one way or another they will collectively pay the taxes, no matter how those taxes are calculated. Technically, the tax that's being discussed, which is a lot like the Euro. VAT (that is a consumption VAT, except that, from the description it is not clear that it is a Value Added Tax, since that really depends on how it is calculated, paid and credited at intermediate steps in the production and commerce process; really it doesn't matter since at the sales counter it will look like a VAT). The tax is not regressive, nor is it inherently regressive to income (which is what people really mean now when they call a tax regressive). Rich people buy goods and services whose true value (or utility) is lower than those generally purchased by the poor. We call those luxury items. How much more useful is a BMW than a Chevy? Not much, but you pay more for the BMW. What really makes it look like it is regressive to income is that the savings rates for rich people are generally higher than for poor people. Does anyone know if this Fair Tax would tax securities and investments?