the vat sounds like the fair tax as both are a tax on consumption.
Completely different. For one thing VAT is in
addition to normal income, ssn, and other payroll taxes. The Fair Tax eliminates income and all payroll taxes.
The VAT taxes every step of the process between the supplier and the consumer (ie, every time a link in the chain adds "value"). Supplier sells to manufacturer and its taxed. Manufacturer assembles a part from it, its taxed. Manufacturer sells it to an assembler who builds a product from it, its taxed. All the way down to the consumer its taxed, and there is overhead along each step as the rates varies, there are deductions of the tax you paid verses the tax you add, etc.
Fair Tax taxes only the end consumer for new goods and services only. All payroll taxes are eliminated so you bring home your entire paycheck. In order to spare the poor from the burden on taxes of necessities, (food, shelter, etc.) the cost of the basics is re-rated each year based on the inflation rate of these. The IRS's main job becomes that of a pre-bate distribution service. Each month every household in America gets a "prebate" check equal to the cost of taxes for the base necessities. In essence, the poor pay no taxes, hence the term "Fair." The Fair Tax rate is 23%. Sounds like a lot, but the average cost of compliance with the income tax code raises prices 22%. Competitive forces drop the price by 22% so the actual real price increase is 1%.... but you're getting your entire paycheck so you actually have much, much more spending power.
Its huge advantage over a flat tax is that since investment does not get taxed, and corporate taxes disappear, the US becomes a tax haven for the rest of the world. The trillions from US citizens which have fled this country come flooding back. Since foreign investors and corporations aren't taxed for money invested here, it encourages investment in the US economy. It encourages personal savings and investment, providing money to US industry for economic growth, R&D, etc. Its the only tax which does this.
Additionally, the problem with a flat tax or other simplified system is it still leaves power in the hands of politicians. Reagan greatly simplied the tax system but look what's happened since... more loopholes, thousands of clauses, exemptions, etc. Any income tax this country has tends to complicate over years due to special interests.
I used to prefer a flat tax until I really studied the Fair Tax. Its got over 20 years and millions of dollars of research put into it by economists much smarter than me. It would make our economy boom.
Fairtax.org
The problem with the Fair Tax as noted elsewhere, is its simple, but not easy to explain. People can't get past the 23% rate, and that requires explaining the prebates, the 22% cost of compliance with the current system, and the fact that all payroll taxes are eliminated.
No way they could miss this thread given the title. Unless I missed it, no one (and some have stated it plainly in other recent threads) who agrees with the premise has answered the question posed - except Katsmeow, and I applaud you.
i remember hearing many debates about the flat tax vs the fair tax and the flat tax always made more sense. since so many politicians are trying to turn the us into europe i'm sure a vat is coming along with high speed rail, both a terrible idea.
