I'm sorry I just don't understand your reasoning here . I think you are assuming a free lunch that just does not exist. Do this thought experiment with me and then show me my error. (a)First let's assume the imbedded tax rate of the fair tax is revenue neutral for govt operations. (b)For simplicity lets only assume there are federal taxes: income and capital gains. (c) no inflation and no true wage rate changes Now examine a working couple(1the spend thrifts) who spend all of their yearly income of say combined gross $60-120k. They spend all of their money on either taxes or consumer spending before the fair tax. Then the fair tax is implemented their behavior stays the same and the fair tax is revenue neutral as we assumed above. Working couple (1) still find themselves in exactly the same situation before and after the change. They got to take home all of their gross income because there was no income tax. However they paid for and got exactly the same amount of consumer goods and consequently paid the same federal tax imbedded in prices because they spent every last dime on consumer goods. (their habit) Now we have working couple (2) they gross the exact same income as (1). However wc(2) are frugal savers. Before the change they pay the exact same amount of income tax that wc(1)pays, buy reduced amount of consumer goods and manage to save 30K in a taxable account. After the tax change wc(2) keep the exact same habits and consume the same reduced consumer goods. They end up better off because the 30k that they save was not taxed by an imbedded consumption tax. I know I am belaboring the point but what it does is give a variable tax rate for a given amount of income based directly in proportion to consumption. to be continued:
Now on to demonstrate the problem with the fair tax. Now lets assume we have working couple3. wc3 are just about to retire and have the exact same behavioral habits for the last 30 yrs that (wc2 the savers) did. Before the fair tax for the past 30 yrs they have been paying the exact same amount of taxes as the spendthrift (wc1). After the fair tax they are retired and dramatically increase their consumption 3 fold. Now they really feel cheated saving all that money paying the same federal taxes as wc1 and now saddled with the extra burden of an imbedded consumption tax. They should have blown the 30k a year. They paid the same income tax amount as the spend thrifts and now to even up the total consumption between couple wc1 and wc3 . wc 3 find themselves paying 3 times the imbeded tax amount - the capital gains savings( since no cap gains) Basically it's the responsible savers who get hosed. Pretty much the same as the diligent person who pays forward all his income tax and all of his retirement money in a roth IRA. And they subsequently decide to tax consumption or treat Roth withdrawals as income for income tax purposes. These people get double hosed. Looking for vista or tigerjaw to see where I'm wrong.
The thread seems to have wondered off into an interesting view on tax, but to return to the subject of democracy for a moment if i may. Democracy by its very nature is about numbers, who has the most votes. Putting aside ballot rigging etc. the end result is a sort of mediocrity. Imho we need quality people at the top. Not just greedy people filling their boots with taxpayer's money. Political life is like a marathon without a finishing line. The USA has been out in front for 5 decades but is visibly faltering. The BRIC countries are coming up fast in the outside lane. Quality is the answer. So how do quality people in a new re-generated system get to the top ? Not easy in the shark infested waters. Perhaps have a grading system. For various achievements there are points to be won which would translate into votes. Basically the bottom people ( lazy good-for-nothings) get 1 vote apiece. Really for just being alive. Anyone who achieves anything, like a qualification gets additional votes. The value added voters hopefully would make better informed choices.
I'll try to give a quick answer to this and then we'll get back to Humpy's thread. People that are retired are going to pay taxes either way on the products that they purchase. They're going to be either imbedded taxes or the FairTax. They are approx. the same amount. However, retirees wouldn't pay a dime in capital gains tax or any tax on their SS checks. With the FairTax you only pay as much as you want to. Your choice, not the choice of some politician. Some people complain that they wouldn't have the mortgage interest deduction anymore. So what, we wouldn't have any more income tax.
My only idea on this is, somehow the vote should be limited to the producers, keeping it out of the hands of the takers.
There are some alternatives like:- Plutocracy - the US is probably more of a plutocracy where money is king than a democracy. Dictatorship - Anyone with even 1 braincell can tell that the awful dictatorships of the 20th century are complete non-starters except for the few at the top. Theocracy - this is the rule of the religious. Tried in Britain in the 17th century and quickly abandoned. The Taleban is the modern example. Not my idea of fun. Technocracy - the rule of experts and technocrats. Largely untried and probably unworkable. Military takeovers - vicious, bloody and incompetent usually. The pursuit of power corrupts even Saints
On second thoughts could a technocracy perhaps work ? A panel of experts could be appointed to tackle THE problem whatever it is. So instead of relying on someone like George Bush to tackle the problem of climate change ( certain failure ), the world's top experts could be invited to give their opinions. The more I think of it the better I like it. The obvious flaw being the human factor and therefore occupying half wits ( hi George ) with er sex or booze or something
=============== Hum; Democracy [mob rule]is not nearly as good as representative republic; thats why our Judeo-Christian founding fathers did the latter, not former. Also founding fathers said something about character/Bible principles making a difference; not the Koran or false god/allah worshippers. So beliefs[old english word meaning live by] do make a difference]. So moslim mob rule may be about the worst; but as Ann Coulter says ''Invade thier countries, kill thier leaders, convert to Christianity.'' Cool [voluntarily] So yes win the war on terror in both places you mention, the type of gov is secondary. Another improvement for USA,; ''thou shall not covet thy neighbors property''-capitalism again , not socialism/making a little god of gov. Notice that expression of love- God of Israel/God of Universe is for private property ======================================