Quote Originally Posted by Seamus Fermanagh View Post
Not sure if it would function as well as designed in practice. The Fair Tax is supposed to function as noted here. Yes, it is a wiki, but it is pretty religiously "policed" by Fair Tax advocates and is a fair summary of their approach. The basic idea is to be revenue neutral, but to tap into currently untaxed aspects of the economy (black and gray markets because the money is eventually used to buy something that is subject to the tax). Ostensibly, the Fair Tax would replace ALL other forms of federal taxation -- excises, income tax, Spanish war tax on telephones etc. Supposedly, the "prebate" lowers the effective tax burden on lower income families, down to an effective federal tax burden of 0% on necessities.

The Fair Tax has detractors as well, who argue that it is a waste of time because it won't work as planned or, more commonly, because it is politically undoable and hence a waste of time.
What has been the experience with VAT in the UK is that poor and rich alike pay taxes at the point of purchase. But with the poor consuming necessities the same as the rich, the tax paid on these necessities is a much bigger proportion of their income/savings than the same thing paid by the rich. Perhaps it's a bigger chunk in absolute terms as well as the rich can afford to buy a large amount in one go, and sellers are willing to offer discounts if they get their money in one large chunk, whereas the poor need to stagger their purchases which thus precludes discounts. And as for the consumption tax replacing all taxes, the poor have a much lower base rate anyway, and it still hardly helps them cope with price rises.

Just about the best thing that's happened with VAT is the free rein to tax whatever the government likes on consumer drugs like tobacco, alcohol, etc. The most sensible thing they can do is legalise and add cannabis and other currently prohibited stuff to it. Politically impossible though alas.