Pei, the consumption tax has a number of advantages over a flat income tax, one of those being that it incourages saving and investing, because it eliminates the penalties of doing both. That is a good thing, since it will generate capital investment, lower interest rates, and slow the rate of inflation. People will have more of their paycheck each month, so spending will remain pretty much what it is now... and business won't have to pony up the SS and Medicare matching funds that they do now. The addition of the fed consumption tax will be offset by the decrease in price of goods, due to elimination of imbedded tax costs in products and services.
A flat tax will not eliminate the need for a tax confiscation agency (aka the IRS), nor will it eliminate the volumous record keeping that must accompany it. A flat tax would also retain the current system of tax withholding, which is the most insideous aspect of our current tax system. Witholding is what allowed the tax burden to grow and grow, since it's easier to raise taxes without people really realizing it. Since, under the Fair Tax bill, the amount and percentage of the tax paid is on every reciept, it's more difficult to hide tax increases behind the small print.
Doing away with corporate taxes will encourage the return of business that fled this country because of the tax burden (currently the US has the third worst corporate tax burden of the industrialized world). Contrary to popular myth, corporations do indeed pay taxes, though that cost is passed directy to shareholders and consumers.
Economic growth will be the end result of the Fair Tax bill, further fueled by the $500 billion annualy that buesiness and individuals WONT have to spend complying with the tax laws. Economists disagree as to how much growth, but some are predicting as much as 10% annually.
Go to
http://www.fairtax.org if you want to read more on the comparison between the Fair Tax and various flat-tax proposals.
