Predicted Effects
The predicted effects of the FairTax are a source of disagreement among economists and other analysts. According to Money magazine, while many economists and tax experts support the idea of a consumption tax, many of them view the FairTax proposal as having serious problems with evasion and revenue neutrality. Some economists argue that a consumption tax (the FairTax is one such tax) would have a positive effect on economic growth, incentives for international business to locate in the U.S., and increased U.S. international competitiveness (border tax adjustment in global trade). The FairTax would be tax-free on mortgage interest (up to a basic interest rate) and donations, but some law makers have concerns about losing tax incentives on home ownership and charitable contributions. There is also concern about the effect on the income tax industry and the difficulty of repealing the Sixteenth Amendment (to prevent Congress from re-introducing an income tax).
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