We meanwhile do not pay in hidden taxes anything like the amounts that the Fair Tax people claim to be able to recover. The bureaucratic costs of the IRS would supposedly vanish, but the costs of the new and even more invasive bureaucracy that would have to track people in every step of their personal lives in order to assure that they were still eligible to receive a monthly "prebate" check are ignored and thus grossly underestimated. Also not well considered is the factor by which state and local governments will have to come up with new revenues to cover new taxes that they will owe on their existing purchases of new goods and services. These entities do not currently pay income taxes, hence these Fair Tax outlays would be new gross costs to them. This is hardly the end of the issues with the proposal. Consider for instance that if you are a homeowner, you would not only lose the mortgage interest deduction that you currently enjoy, but you would have to pay that 30% sales tax on the interest portion of your monthly mortgage installment as a purchase of new financial services. That will typically run several hundred dollars per month. Are people really aware of and ready for that?
And speaking of housing, the cost of a new home would have to include a 30% sales tax, while the cost of an existing home would have to include a 0% sales tax. What might happen in real estate markets as the result of that, I wonder. Any implications for new versus used cars?