FairTax is an imposition of a Federal Sales Tax (also known as a use or consumption tax) on every NEW item you purchase in place of a income tax. But, believe me it is a TAX on your income, as you need income to make purchases. Is it a step to get people use to a VAT or Value Added Tax (a propagated word) at every step the item goes thru to get to the end user user? Will the Government decide to tax the manufacture on the items that go into the product to make it? How about the distributor level, the wholesaler level? The so-called VAT Tax is not a Value Added Tax in reality it is a cost added tax as ALL taxes add to the cost of whatever it taxes.
The FairTax rate is as proposed in Hr 25 Sec. 101 was 23%. But in order for the business collecting the tax to remit the 23% of the selling price they will need to add 30% to the selling price of the item. Now if the merchant wishes to sell the item at the price he would normally sell it at before the FairTax say a $100. in order for him to make the same profit and collect the tax of 23% the new selling price would need to be $130. To pay the Government their 23% FairTax on the $130 you would need to times the $130 by 23% which would be $29.90. $130 – $29.90 to equal $100.10 so the merchant could receive his original selling price before the FairTax.
Now think of how prices for house, boats, cars, properties would increase. If, you think inflation is bad today wait till you see what items would cost when FairTax is in place. Will Banks finance the FairTax part of a purchase of a house or a boat or a car, etc.?
Most of the people in business I have asked how they felt about FairTax once they understand it, state they do not like it. Many felt it would drive sales down. People would have less money in their pockets to buy things. Impulse purchases would go down.
DOES NOT ABOLISH the IRS or the US Department of Revenue, or whatever they will call it, as the Government will need some department to collect the FairTax from the Merchants. Who will audited the collectors? Do you think the Government will take the collectors word for the taxes submitted?