DKII that makes alot of sense. Thanks for filling in where I wasn't positive.

But that doesn't change the fact that the personal income tax is not one of the taxes contributing to the current price of goods. It shouldn't be, anyway, as far as I can see. So the prices would go up in response to the amount of the personal income tax (and other taxes not currently reflected in prices) being factored into prices.

Click inside the quote box to select it, and choose "remove column" or "delete row" from the toolbar.

But it is.  That 22% is what companies pay to accountants and lawyers to maintain IRS compliance.  You take this away and the company has less overhead.  It surely won't reduce the price of goods by 22%, but it reduces the cost of doing business.  The 23% is simply to replace the current bracketted tax system (that collects 28% or more from the citizens.)  In doing so, you reduce both the cost of running a business, and the cost of running the country (by not requiring a full blown team of IRS accountants and support) thus reducing the amount needed to collect in taxes and cut the amount needed to regulate and legislate the handling of money.  Over time, the 23% will likely fluctuate (just as sales taxes do / I'm also assuming this isn't fixed, sorry for the ignorance on this) to grant funding for whatever inititives are set forth or to spur the economy just like the current interest rates do.

So, in summary.  Replace the 28%+ tax bracketed system with a flat 23% tax that will cover the current expenses just as the bracketed system does.  After the current year taxes are collected, next years funding will be at hundreds of billions more agile (lower Treasury funding to cover tax returns), that can be used for things like debt repaying, social security, etc.  You reduce the cost of doing business by removing the tax compliance burden, thus enabling competitive pricing even more, or allowing the hiring of more people.  The next budget meeting would simply be, do we need to raise this flat tax by .1% to bring in more funding or reduce it by .1% to relax spending?

 @Entroper: thanks

There's an advantage I didn't even think of when considering a FairTax or flat tax: Tax hikes and cuts are obvious.  You can't screw around with the details because there are no details.

 Wow, for some reason I hadn't though of that either...thats actually really nice...obviously not a reason on its own but still....

You forget budget meetings are carried out by congress; they'll undoubtedly muck it up even without details.

But that is where the American public comes in. If the public can get the FairTax passed, then surely we can keep an eye on it. If congress were to raise the rate, everyone would notice immediately and at point-blank range as it would effect their pocketbook. Remember, It is the voting public that has the true power to change America.

Again, you have to question the impartiality of this document, as it's published and released by the very group trying to push this tax system.  That said, I read it anyways and believe it to be flawed.

The first problem is one of math.  This document claims that, through some miracle of bizzare numbers, everyone pays a smaller amount of taxes, but somehow the government makes the same amount of money.  This is pure INSANITY.  They offer up not a single explanation for this fact, leading me to believe that they either don't know about this gaping hole, or they know about it and don't want to admit it.

If you look at their claim that this tax system encourages home ownership with any sort of critical eye and depth, you'll notice that they give a lower interest rate in the Fair Tax system than the current?  Why?  Apparently, in 1995, some reasearch was done claiming that tax reform could result in a drop of 25% in interest rates.  They cleverly say "a tax system such as the Fair Tax" to keep you from noting the obvious problem that the FairTax hadn't been conceived in 1995.  I would question the wisdom not only of having to cite a study done 13 years ago(If this were such a bulletproof conclusion, you would expect to see confirmation, I'm betting they're cherry picking here), but especially when they're taking analysis of one system and applying it to theirs.  This absolutely defies logic.  All of this, and we haven't even taken into account the fact that this is totally reliant on an economic guess at the future from just one study.  Sorry,  but I'd like to see a very long list of studies done on the topic, not just one.  I believe they're cherry picking here, as well.  In addition, there's no mention of the potential side effects of interest rates that are 25% lower.  We're just coming through a credit bubble right now, have these guys not learned that lower interest rates aren't always better?

Then you take a look at their GDP growth table.   Ignoring the once again flawed idea that we're relying on economic guesswork, there are problems.  For one, the meaning of this table is very vague.  When they claim that in the tenth year GDP growth will be around 11%, do they mean for that year along the GDP will grow 11% or do they mean that over 10 years it will have grown 11%?  If they mean that 10 year GDP growth will be 11%, then this tax system is in trouble.  Over the past 10 years, the percentage growth year over year has added up to over 11% themselves.  Since this doesn't take into account the fact that previous years growths would make the actual percentage larger than the sum of percentages, we can conclude that an 11% growth over 10 years would be rather, well, pathetic.  If they mean an 11% year over year increase in GDP, then that too isn't so good, as it would lead to economic overheating.  They make the vague claim that this growth is x% "than it would otherwise be."  Again, you have to question the assumptions that they made for "otherwise be."  What were they putting GDP growth at for "otherwise be?"  We don't know, and they're not telling us.  Additionally, as we all know, GDP doesn't always grow.  They haven't shown how the system reacts to the FairTax in years of recession.  This is troubling.

These sorts of problems are peppered through that document, so I personally believe it to be inherently flawed. 

It's not really that simple.  The income tax didn't get to be where it is today by tweaking it up and down; they added details, and the people allowed it to happen.  I think the same thing would happen with the FairTax.  An exception would be put in for this, then for that, then for the other, and they would all sound like really good ideas at the time.  Before you know it, you'd have the FairTax Revenue Service.

I still think it's a good idea, but this is just my view of how things typically work.  A system is put in place, and tweaked here and there until no one can make heads or tails of it, and therefore no one can figure out how to fix it, so it's scrapped and replaced with a new system.  Repeat ad nauseam.