why the fair tax won't work in America

This will become a pretty big topic as the election nears and I was kind of on the fence about it before, but now I don't think there is any real benefit. There are some benefits to the fair tax in that it would eliminate the problems with getting paid under the table or taking cash for services. Taking cash at work or an illegal alien it does not matter how you get the money it will only matter that you spend it. It could also eliminate the death tax by having people "work" for you and paying them their inheritance over a 1 week period. Say you have a $4 million dollar estate and you want to give to someone, just have them "work" for you for 2 days at the rate of $2 million per day. Plus it would get rid of the IRS.
The problems are that the infrastructure of the United States is supported by the current tax system and no matter how cumbersome it seems, with automation the process is getting simpler. Also if there is a wholesale change the actual revenue that is going to generated won't actually be known until the system is in place. I think you'll see people start buying things under the table, at local farms for food or some smaller stores that will sell you stuff with a wink and smile for a little cash. Hey, why pay the government 30% when you can just pay the vendor 10% extra and just walk out. The problems arise in that who is going to audit these vendors. People follow the rules now, for the most part, because they don't want to be audited and they fear the current system. By switching tax structures without any infrastructure to support it is like tearing down a steel bridge and replacing in with Popsicle sticks. Sure it sounds like it will work and it looks like it will work, but when it has to actually support something it will fall apart because the inner workings are too weak. Plus if the government is thinking that just upping the price of things 30% won't cause people to think twice about doing stuff, they are wrong. An extra dollar for a gallon of milk, we'll be drinking water thank you very much. Also you have to figure that the government has plugged all the variables into some little formula to spit out 30% as the number needed to replace all of the current income generated under the current system, which in all likelihood means they would need 70%. See if someone is making $10 million a year currently they would be paying in $3 million, but if you go to the fair tax they would have to spend all $10 million to get the same money. If they can "survive" by spending only a million dollars (plus 30%) then they get an extra 2.7 million that would have gone to the government. Sure eventually the money would get spent, but what if they buy their yacht from a foreign entity and have their car imported then what happens. Do you lower the tax on luxury item to keep people from buying them abroad? Then we are right back to the "unfair" tax system we have now. I think the only way you could implement the tax system is in stages. The first year is 2/3 income tax 1/3 federal sales tax, then 1/3 income tax then 2/3 sales tax, and then in the third year you go 100% sales tax. Provided that the first year shows you can actually pay for all of the programs you have if you increase the sales tax to 30%. If the first year shows that you would need a 40% sales tax then forget it and revert back to the old system. Also think of the people that would be out of work - All the IRS folks (although you are going to need someone to keep the new system in check), the people at H&R block, and all those people who work on the tax codes and developing software and stuff. I think the first step is to eliminate all of the state income taxes, some states already have eliminated it or never had income tax in the first place, and replace it with a state sales tax. Then you could work an overall tax and the state would get a certain percent and the federal government would get the rest.

Anyway I don't think the tax would work now, but maybe in a few years, but like I said it is going to have to be a real gradual change. Anyone who thinks they can just come in and have the system up and running in a year is making a huge mistake. The first thing we need to do is get the federal interest rate back up, then we can talk about changing the infrastructure. Right now the fed can't handle a huge upset, it is still struggling from 9/11 and the latest subprime bail out. Right now the low fed rate is falsely floating the economy but it isn't encouraging any real growth. The paybacks are low, and money is changing hands, but not in a real fruitful way, That is why the dollar is suffering so much and oil is over $100 a barrel. That's enough for tonight time to go watch the game and see who loses.