The bill’s contents are more than intriguing. It starts out with the statement that it will replace our present personal and corporation income taxes with a national consumption tax. I know that sounds pretty dramatic, but give me a little of your time to cover the basic principles.

First of all, many corporations pay no taxes, anyway. I know it would make us feel good to tax corporations more and more, but we are the ones who eventually pay the tab.

The flat tax rate would be set at 22 or 23 percent. Remember, this is not in addition to the income tax, it totally replaces it. That means no federal tax withholdings as well as no withholdings for Social Security or Medicare. No estate tax, gift tax, or self-employment tax either. All these costs are factored into the 22 percent rate. You would get to keep 100 percent of what you earn.

If you think the 23 percent consumption tax rate is too high, there was a study done by a Harvard professor a few years back showing that the tax embedded in all goods and services amounted to an average of 22 percent of those goods or services purchased.

Actually, depending on the product or service, the range of embedded taxes was from 15 percent to 26 percent. An embedded tax is a tax paid by the string of companies that have something to do with the product you eventually acquire.

The taxes these companies pay are simply passed on to the next consumer, with the total of these taxes embedded in the final price. In the end, the final consumer pays all the taxes paid by businesses. If you think corporations won’t reduce the price of their products by their tax savings, competition will do it for them.

Look at some of the advantages. First, the complexities of the present Internal Revenue Code and Regulations are completely gone. As a matter of fact, the IRS would be eliminated.

Second, savings and investing are encouraged. Can you imagine keeping 100 percent of your interest and dividend earnings? These savings, after investing them, will provide a significant fueling for economic expansion and job creation.

Third, think of all the money currently being kept off-shore for tax-avoidance reasons. A Merrill Lynch consulting study done in 2000 estimated that a third of the wealth of the highest net worth individuals is held offshore. This one-third is estimated to total $11 trillion! Since the applicable tax rate on such funds will now be zero, this money will be kept onshore.

Fourth, what about the underground economy? Since this exists solely to avoid income taxes, there would be no logic for continuing this practice.

Fifth, with businesses no longer saddled with high employment taxes, there is the possibility that the present actions of job outsourcing would be significantly reduced and possibly even reversed. There would no longer be any reason to locate in overseas countries that provide favorable tax treatment to corporations.

Sixth, look at how competitive our products will be in overseas markets once that previously embedded tax rate has been removed. In order for foreign companies to receive the same benefits, they would have to establish a presence in the United States. Translation, more job creation.

There are many more justifications for the Fair Tax, but I want to answer a question on everyone’s mind. What about the poor? Since the tax is applied on all new purchases, that means the poor will also pay on food, medicine and all other necessities.

The congressman has addressed this issue with what he calls a prebate. The government would issue a check or electronically transfer 1/12th of the first amounts spent that represent the government’s calculated poverty level based on family size. It would be indexed for inflation every year.

The book gives an example. If the poverty level is set at $25,660, 22 percent of that would be $5,902. This amount would be divided by 12 and ALL taxpayers would receive a monthly check of $492.

I apologize for having to be so brief, but there is an excellent book for you to read that goes into much more detail and substantiation than I can in this column. The book is "The Fair Tax Book," by Congressman John Linder and Neal Boortz. You should be able to get through it in one evening, and it will answer most, if not all, of your doubts, concerns and skepticism.

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Tom Sears is a professor of accounting at Hartwick College in Oneonta. He can be reached at SearsT@hartwick.edu. His column appears every other week.