Key Takeaways
The Fair Tax plan is a 23% sales tax that would replace the current U.S. income tax.
It would reduce the headache of annual tax preparation because it's simple, but it would raise the tax burden for 90% of taxpayers.
Only the top 10% of incomes would actually see a tax cut. //

William Gale of the Brookings Institute has noted that it isn’t accurate to refer to the Fair Tax as 23%. He indicates that the rate is actually 30%. Fair Tax defines the sales tax as "$0.23 out of every dollar spent," which means that a $0.23 tax is added to every $0.77, not to every dollar.6

Gale also points out that the tax rate would likely need to be raised even higher because states would have to abolish or significantly alter their income tax systems without the IRS to determine tax on wages. This lost state revenue would require an additional 10% sales tax to replace it.

Another 5% would have to be added to recoup revenue from those who have figured out how to avoid the sales tax.

These three adjustments push the sales tax to 45%. Many Americans would protest having such a high tax on essentials such as food and health care. The effective rate could skyrocket to 67% on other items if food and health care weren't taxed. ///

Anna thus voters would increase pressure on Congress to reduce spending and taxes, because they directly see the cost of their taxes, rather than the "hidden" income tax.