Critics say the national sales tax proposal is doomed.
Retailers oppose the idea because they don't want to become the nation's tax collectors. What those retailers don't want to understand is that the tax collection process is already in place. Instead of paying employee taxes, social security taxes and other business taxes, they just collect and pay a sales tax on new items only. It's much easier to figure than what they're doing now.
Democrats don't like it because they say it hurts lower-income workers. SOME Democrats SAY they don't like it. They don't like it because they perceive that it's a Republican policy (it isn't -- it's bipartisan). Those Democrats haven't listened long enough to comprehend that the impoverished will get a monthly income check so that they don't pay any tax at all. But hey, the poor might be able to get ahead that way -- Democrats would rather keep them down so they'll have someone to "rescue."
Low-wage earners spend most, if not all, of their income on basic necessities and a few nonessential items and so most, if not all, of their income would effectively be taxed under a sales tax-only scheme. EXCEPT for the rebate -- $178 per month per person for everyone with a valid social security number.
The rich, on the hand, arguably buy more and so would pay more taxes in absolute dollars, but not as a percentage of their overall income. The rich buy more expensive things than the average person, from cars and homes to clothes and entertainment. So they'll pay more tax -- but they have more money, so they can afford it. Besides, in a sense they'll be subsidizing the poor, who can't afford to pay as much. But the rich, too, get the $178 per person per month rebate.
President Bush has said he wants a revamped income tax system that preserves charitable giving and home ownership incentives, both of which are now embedded in the current code. Being able to spend one's entire paycheck however one chooses is the best incentive imaginable for buying a home. People buy homes for a huge variety of reasons from the freedom to paint and garden to saving money by building equity -- those things would happen with the FairTax.
As for charitable giving, it would get the government out of that. Charities would much prefer money with no strings attached and churches have learned that the more money people have to spend, the more generous they are in their giving.
Despite the heavy opposition, even skeptics are loathe to underestimate the "Fair Tax" -- or some variation of it.
After all, notes Chris Edwards, the director of tax policy studies at the Cato Institute, the libertarian think tank: "Social Security reform started off 20 years ago as a radical, loony idea."