Apparently you are John Snow Know Nothing when it comes to the Fair Tax.
Allow me to enlighten you.
The Fair Tax is a 'progressive tax' with 2 key parts.
Part 1: The Consumption Tax
An inclusive consumption tax at a flat rate (at last reading, would be around 22%-23%) placed on all *NEW* goods and all services at the retail level.
This can only work if income and corporate taxes are repealed, as those are embedded invisibly into the final retail cost of a product or service along the supply chain. By removing those embedded taxes, the retail price would fall by approx 22-23%. Apply the inclusive consumption tax and the final retail price returns to almost the same as it's present value +- 1-2%.
Used or second hand products would not be taxed, as only NEW goods and services. States would facilitate the collection of the consumption tax as they already have in place the mechanisms for collecting sales tax. The inclusive tax would show up on receipts as a line item to make it's cost transparent to the consumer.
Part 2: The Prebate (aka, the progressive portion)
Each household of citizens will receive, based on family size, a prebate equal to the poverty limit for a family of that size, divided into 12 monthly payments over the course of a year. This prebate payment is to cover the cost of the consumption tax up to 100% spending of the poverty line for that family size.
Example 1:
presuming the poverty line for a single individual is $10,000, a single person household would get a prebate of (23% x 10,000) / 12, or $191.67 each month to cover the consumption tax. Consumption tax spent over the poverty line for that single person household would then be the responsibility of that person.
Example 2:
Presume a 5 person family poverty line is $30,000, that household will recieve a prebate of (23% x 30,000) / 12, or $575.00 each month to cover consumption taxes.
Example 3:
Lets take that same family of 5, and presume the household has an income of $50,000 (note not payroll, personal income taxes, medicare, etc taxes, they get 100% of check), and that family chose to spend 100% of their income on new goods and services. They would have ended up paying $11,500 in consumption tax over the course of the year. However, they also get their prebate for a family of 5 at the poverty level, which would be $6,900 over the year. This offsets the $11,500 in consumption tax, reducing the amount the household has to be responsible for down to $4,600 over the course of the year, or $383.33 monthly in inclusive consumption tax paid, presuming 100% of income spent on new goods and services.
Example 4:
Let us presume a wealthy individual that makes say, $250,000 a year. If that individual spent 100% of their income on new goods and services as in the above examples, this individual would have paid $57,500.00 in consumption taxes over the course of a year ($4,791.67 monthly in tax paid). However, this individual also gets their pretbate for the exact same amount as the person in example 1, as the poverty line for a single person is presumed in these examples to be $10,000. Thus this individual would recieve $2,300 a year ($191.67 monthly), to cover the consumption tax, reducing their tax to $55,200 yearly ($4,600 monthly).
Consumption tax liability covered by prebate assuming 100% spending on new goods and services:
Example 1: 100% covered by prebate, $0 out of pocket monthly tax expense
Example 2: 100% covered by prebate, $0 out of pocket monthly tax expense
Example 3: 60% covered by prebate, $383.33 out of pocket monthly tax expense
Example 4: 4% covered by prebate, $4,600 out of pocket monthly tax expense
Thus, a family living in poverty will never pay the consumption tax as it is covered by their prebate and wealthier households will spend considerably more with the same spending habbits.
Additional benefits include:
Tax free second hand market place, only new goods are taxed at retail.
No tax loopholes.
No more IRS
Corporate decisions no longer influenced by taxation
Massive incentive for hiring and capital investments due to no coporate taxation, leading to biggest economic growth, ever. (Business don't pay taxes, they collect them from the consumer in the form of embedded costs or firing employees and pass along to government)
Drug Dealers, Off-the-books workers, and illegal aliens would all pay tax.
Repeal of income tax.
Removal of estate, medicare, and payroll taxes.
100% of your paycheck in your pocket
Win-Win for everyone but the politician who can't make new exceptions or loopholes to the tax code. Changing the rate or the plan would require... i believe it was 70% majority.