What is this business about the fairtax collecting taxes from Government consumption.

An important thing to remember is that the fairtax replaces the income tax.

In order to understand why the fairtax taxes government consumption, we need to first understand how government collects taxes from government's spending under present income taxes. To simplify the discussion, imagine a group of people on an island. Every year, each chips in 22% of his income to pay for things important to the group.

One year the people decided they need a bridge to get to the other island. Among them were some bridge builders that bid on the project. One was awarded the contract. He built the bridge, and was payed from the treasury upon completion.

The group's spending is income for some of its members. When they pay their income tax, it is counted along with other members of the group in next year's tax receipts.

Because individuals that receive payments from the group for their services also pay 22% of their earnings as tax to their government, 22% of government's spending will count in next years tax receipts.

If the government buys loafs of bread and distributes them, how is that not end consumption. Why should it be not taxed under the fairtax? To not tax it will give the perverse and false sense that it is cheaper to get things we need from the government when in fact they cost the same or (because of reduced economic output under socialisim) cost more

In America, corporate income, capitol gains, payroll, and personal income taxes are embedded in the cost of city, state, and federal government spending on both their government employees, and their purchases. Those embedded cost account for about 22% of all city state and federal spending. The fairtax removes those cost and replaces them with a simple revenue neutral consumption tax on all new products and services, including government consumption.