The Senate version, S. 25, is sponsored by Saxby Chambliss (R-GA) and has no current cosponsors.  I don’t have the time or the energy to look up the party affiliations of the 37 House Cosponsors, but I hope there are a few Democrats there.  One of the original men behind this bill was Collin Peterson, a Democrat from Minnesota.

I’m sure that a 23% sales tax sounds high, but the authors point out that all of our current products are produced by people who pay taxes, and therefore have an “embedded” tax in their current price.  If the income tax is removed, these “embedded” taxes should disappear.  These embedded taxes generally amount to around 22%, so the end result is that a product that currently costs $100 would cost about $101.40 under the FairTax plan.  You’ll be able to afford that extra 1.4% increase though, because your take home pay is going to increase by between 30% and 70% depending on your current tax bracket.

There’s also a “prebate” check you’ll be receiving every month to cover the sales taxes on your living expenses.  If you’re married and have a family of four, this will be a check for about $500 every month.  That should again help with the $1.40 added to your $100 grocery bill.

Now, no tax plan is perfect, and there are some people who will be adversely affected by the FairTax.  I’ll list them, and you can decide for yourself how sympathetic you are to these groups.   If you’re very sympathetic, then perhaps the FairTax isn’t right for you.

1) Tax evaders.  People who have a significant amount of “undeclared” income every year.  The house painter that wants to be paid in “cash”.   The waiter that “forgets” to declare his/her tips.  This group consists of people performing legal activities, but cheating on their taxes.  This group costs the “non-cheaters” about $2000 annually, each.  So, if you’re married, then this group raises the annual tax bill for you and your spouse by about $4000.
2) People/Organizations who earn their income illegally.  Drug dealers, illegal workers, prostitutes (in most U.S. areas).
3) People/Organizations who use offshore financial centers (remember the book/movie The Firm?) such as the Cayman islands to house their money and conduct their business.
4) The “independent” wealthy.  This group has little or no “earned income”.  Even an active civil lawyer may fit into this category by managing his/her money correctly.  But this group doesn’t pay Social Security or Medicare taxes because they aren’t “employed”, and they use the tax laws or perhaps those offshore financial centers to limit their income tax liability as well.  No tax liabilities = no tax.
5) Foreign tourists.  When they spend money in the U.S. under the FairTax plan, they’ll increase the tax revenue for the U.S.  And they won’t get a monthly “prebate”.
6) Lobbyists.  These are the people living in Washington D.C. and other places who make their living by convincing Senator X and Congressman Y that they need to vote to give a tax break to Corporation A, or Organization B.  They make their living because the tax code is so complicated that Corporation A and Organization B can get that tax break without the citizenry complaining, because we’ll never figure out exactly what happened.  These people are going to be out of a job, if the tax code is ever simplified this way, and will have to earn a living performing an actual service for the community (“Would you like fries with that?”).

These groups take a hit because right now they're all avoiding paying taxes into the general fund.  However, with a consumption tax, when they spend their money, whether ill-gotten or not, they're going to be contributing to the fund.  Of course, then we won't be able to prosecute the Al Capone's of the world for income tax evasion, but I'm sure the Eliot Ness's of the world can come up with something just as creative.

There’s one final group that bears mentioning.  This group isn’t exactly “penalized” by the FairTax, but they don’t receive as much of the benefits as other groups.

1) Those living on Social Security.  Currently, this group does not pay income taxes (at least on their Social Security benefits), but they would be subject to the retail sales tax.  They’re still going to get the “prebate”, though, and they probably live on mostly the “essentials” which is what the “prebate” is supposed to cover.  They’ll still come out ahead, most likely, but not as far ahead as your typical wage earner.  This is unfortunate.  They’ve lived their entire lives under a corrupt system, and finally when they reach the age where they can take advantage of the corruption, we’d take the advantages away from them.

Anyway, I urge you to buy the book and read it.  You’ll learn something, whether you agree or disagree with the authors conclusions.  I further urge you to find out the positions on this of your elected representation, and those seeking to obtain those positions.  When it comes to election time, ask those who want your vote where they stand.  This is an idea that’s been floating around for 20 years or more and has been studied from every angle by groups both for and against it, so the answer “Well, I think it needs more study” shouldn’t satisfy you.  If you get that answer, press for a real one by informing the candidate that this is a very important issue, and if s/he can’t take the time to study up on important issues and form an opinion, then they don’t deserve your vote.

My only significant criticism of the FairTax is that I think it would lead to higher interest rates on long-term mortgages.  The book claims the opposite, but either I am missing something obvious (which is likely), or the authors are mistaken.  I can see that short-term rates and credit card rates would go down because they’re highly impacted by the “embedded” taxes, but I think that long-term rates are more impacted by the Prime Rate than the “embedded” taxes because they get to spread that cost over the lifetime of the loan.  It’s almost certain that the U.S. economy would grow at an incredible rate under this plan (which would bring in more revenue and bring that 23% rate down, btw).  That growth, though, would lead the Alan Greenspan’s of the world to want to raise the Prime Rate to keep inflation in check, though.  So, I think you either get inflation, or you get higher interest rates.  I’m not an economist, though, so I’m most likely completely mistaken.

Anyway, buy the book.  Read it.  Follow the suggestions in the book, if you like what you read.  If you hate what you read, do something appropriate for that also (tell your representative, join an opposition organization, flame me).  Whatever you do, get informed.

UPDATE:  Took me long enough, but I finally found out.  Not a single Democrat or Independent on the list.  Sad.