Why Does the Poverty Line Matter?
Here’s another comment by quadrupole (from the Rich vs Joe discussion) that deserves front-page status.
In answer to the question: “Why does the poverty line matter when you are structuring a system of taxation?”
When you are talking about necessities, you need someway to quantify them. For example, clearly everyone needs food, but not all spending on food is necessary. It’s very unfair to treat Mr Rich’s filet minot as being as necessary as Mr Poor’s rice and beans. Likewise with other essentials like housing, clothing, etc. This is one of the reasons why the FairTax uses a prebate instead of exempting certain good.
The generally accepted way of quantifying necessities is the poverty line (which varies by household size). This year the poverty line for a household is $9800 for the first member of the household plus $3400 for each additional person. The family consumption allowance for the FairTax is generally set at the poverty line (varying by household size).
There is also an anti-marriage penalty clause that raises the Family Consumption Allowance (FCA)for a married couple so that both spouses count as $9800 in FCA. So a married family of four would have the first $9800 + $9800 + $3400 +$3400 = $26400 of their spending effectively tax excempt (through the prebate). Can a family of four spend more than that on housing, food, clothing, etc. Absolutely. But the FCA is meant to subsidize the bare necessities, not the lifestyle choices that people make above and beyond them.
Is it a perfect system? No. It is however the best system I’ve seen to date for trying to make sure that people don’t pay consumption taxes on their necessities of life. It also compares quite favorably to things like the current standard deduction and exemptions (which are meant to server a similar purpose).
Well said.
Really, we should just recruit this guy as one of our bloggers here. 
