B. Thomas Blair (thomasblair) wrote in thefairtax,
B. Thomas Blair

The Family Consumption Allowance.

Statement: The Family Consumption Allowance (the prebate) exists to make the tax progressive (read: politically viable). Without the FCA, Linder & Boortz estimated the percentage required to be about 17%.

Question: Could the FairTax be more politically viable if the prebate were removed and the nominal tax rate reduced to 17%?

Rationale: The poor stand to benefit the most from the FairTax, irregardless of whether the prebate is included or not. With the prebate, they begin to receive all of their paychecks. They don't pay tax on used items. They pay the 23% tax on items priced at 78% (on average, prices are inflated 22% by hidden taxes) of their current prices. They come out even (well, within pennies) on the retail side, and they don't pay tax on anything used, PLUS they get to keep all of their income, AND they get $183/person/month to cover taxes up to the poverty line.

Without the prebate, all the same advantages apply except the prebate. An additional advantage gained is a reduction to 17% sales tax, causing them to come out ahead with the FairTax than in the current system. Additional advantages for everyone else include the 17% rate as opposed to the 23% rate, which would make it much more politically viable to the rest of the population.

What say you?
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