Imagine the stimulus for the economy when every penny that is deducted from everyone's pay (for income tax and payroll deductions) is given to them instead of sending it to the government. If every penny that the IRS collects is first given to the taxpayer to spend where needed, the result would be impressive.
The fair tax encourages saving/paying off debt and investment. You might argue that more saving is counter productive to this tax but then you would have to convince me that Americans will quit letting money burn a hole in their pocket which is a tough sell. This would still only be short term.
Short term would also be hugely advantaged by foreign money that would now be moved here as a tax shelter instead of the cayman islands and the like. Both short and long term are benefited by the fact that investments are tax free. This encourages business growth in a big way.
A fair tax, or a national sales tax, is a sufficient substitute for an income tax. Consider the GDP of America and a tax rate of 10 percent on all purchases. The resulting budget windfall would more than make up for any losses in income taxes. The national sales tax is fair because the more money someone makes, the more they spend and the more sales tax they pay. The contemporary global economy is based upon consumer spending, so it only makes sense that the income tax, now more than 100 years old, is retired for something more up-to-date.
Fairtax is a very bad tax reform plan with a nice sounding name. The FT scheme has the federal government taxing State and Local government consumption in addition to the idiotic proposal to tax itself. 20% of the revenue raised is therefore hidden in higher S/L taxes. That isn't transparency!
The FT throws seniors under the bus by (1) double taxing their after tax savings when spent; (2) forcing seniors to resume paying into the SS Trust Funds with their sales tax dollars;and (3) increases middle class retirees federal tax burden while reducing their purchasing power.
The FT "prebate" is not a tax refund in advance, but is clearly a cash grant entitlement costing $600 billion annually. The prebate creates a group of millions of lower income workers who would pay no net federal tax, yet would still receive full SS retirement benefits. That kind of "nanny state" cannot be supported!
The Fairtax isn't fair!