Since posting The IRS Chain Gang, a number of readers have written about the FairTax initiative.

Simply put, FairTax is a consumption tax. That means you are taxed on what you spend, not what you earn. You can think of it as a sales tax. Such a tax would encourage savings and would not penalize productivity and economic output the way the income tax does.

One of the main complaints about consumption taxes is that they hurt poor people disproportionately. The FairTax accounts for this as well; there is no tax on spending up to the poverty level. That’s implemented by a refund check—sent out in advance each month—to every family. So, before anybody would pay any tax, they would have the money in hand to offset the amount of taxes that would be incurred on poverty level spending.

Congressman John Linder of Georgia is the sponsor of FairTax in the House. He gives a brief explanation FairTax on his website. (Note: Video will begin playing automatically when accessing this page.)