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Message: <blockquote data-quote="poopgiggle" data-source="post: 1967289" data-attributes="member: 6406">Here's the deal with the Fair Tax:Consumption taxes are understood to be regressive (they tax poorer people more) by basically anyone who has taken an economics class. Poor people spend almost all of their income on stuff, i.e. food. Wealthy people have wealth, meaning that they hardly spend any of their money on consumption. Therefore, poor people are taxed more heavily by a flat consumption tax.The Fair Tax "solution" is to offer a prebate of x dollars, which will counteract the tax on basic consumption by poor people. While this works for the really low income brackets, it does little to alleviate the extra tax burden on the middle class. Meanwhile, rich people still hardly spend any money (comparatively) on consumption. So basically this shifts all the tax burden onto the middle class.The pot of gold at the end of the Fair Tax rainbow is that it would reduce the bureaucratic overhead involved in enforcing the tax code and processing tax returns. However, it is unclear how the savings on the IRS would counteract the loss in revenue from the Fair Tax. This would mean cutting big-ticket items like Social Security and defense, which are political atom bombs even if you don't agree with them.So basically the Fair Tax is another pile of demagogic Tea Party crap that won't ever happen, and would be a disaster if it did.</blockquote>