The Grassroots Corner October 20th, 2025

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  • Source: FAIRtax
  • 10/20/2025

MARK SCHAFF PUTS GROK AI TO THE TEST – PART 2

Mark and Cyndi Schaff

 

          Our FAIRtax Leader in South Carolina, Mark Schaff, put Grok to the test and sent in the results. Grok claims to be a free AI assistant designed by AI that says it maximizes truth and objectivity. It states that it offers real-time search, image generation, trend analysis, and more. Let’s see how well it measured up to those goals.

Last time we reported on the positive points Grok made about the FAIRtax. This week, we begin exploring Grok's perspectives on the negatives. This is the second of a multi-part series on Grok and other forms of AI.
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Potential Negative Impacts

1. Regressivity Concerns:
   - Critics argue the FairTax is regressive on income, as lower-income households spend a higher percentage of their income on consumption, even with the rebate. For example, a household spending $30,000 annually would face a 3.4% effective tax rate after the rebate, while a $125,000-spending household faces 18.3%. (https://en.wikipedia.org/wiki/FairTax)

Ed: Grok, citing Wikipedia, overlooks at least three more critical factors about the FAIRtax that help low-income individuals. In addition to the Prebate, the FAIRtax replaces the Payroll Tax, which is the most regressive tax in the federal inventory. Every wage earner pays the federal payroll taxes, which add up to 7.65%, on every dollar they make up to $176,000.  Obviously, this means that most wage earners pay the tax on their entire income.  There are no exemptions, no standard deduction.

 Meanwhile, wealthy individuals who live largely off of investment income are able to avoid most if not all of this tax.  Second, the FAIRtax removes tax costs embedded in the prices of goods and services that ultimately find their way to the consumer, including the low-income consumer. Third, the FAIRtax adjusts Social Security benefits for any increase in the cost of living due to the tax.

   - High-income earners, who often finance consumption with savings rather than income, may see reduced tax burdens, shifting costs to lower- and middle-income families. (https://www.americanprogress.org/article/the-fair-tax-act-would-radically-restructure-the-nations-tax-system-in-favor-of-the-wealthy/)

Ed: It’s true that low and middle income earners spend a larger percentage of their income than high income earners, but that’s irrelevant with the FAIRtax.  Thanks to the prebate, a family with a poverty level income that spends 100% of what they make pays an out of pocket tax rate of zero with the FAIRtax.  A wealthy family that spends just 40% of their income, but in doing so spends at ten times the poverty level pays an effective FAIRtax rate of 20.7%.  With the FAIRtax, it’s not the percentage of your income that gets spent that counts.  It’s how much of your spending rises above the poverty level.

Consider also what happens to income that is not consumed. High-income earners who invest their savings instead of keeping them under a mattress give others the use of their money. When high-income earners consume savings, they pay tax. Thus, the FAIRtax is a wealth tax that taxes wealth when consumed. Sooner or later, all wealth is consumed.

2. Revenue Shortfalls:
   - The proposed 23% tax-inclusive rate (30% tax-exclusive) is likely insufficient to replace current federal revenues. Brookings Institution estimates a 28% tax-inclusive rate (39% tax-exclusive) is needed for revenue neutrality, and with evasion, rates could rise to 34.1% (51.7% tax-exclusive), adding trillions to deficits over a decade if unchanged.
(https://www.brookings.edu/articles/proposed-fairtax-rate-would-add-trillions-to-deficits-over-10-years/) (https://www.brookings.edu/articles/deconstructing-the-fair-tax/)

Ed: This claim comes from an economist named William Gale. Famously, at a debate, Gale received a challenge from economists David Tuerck and Laurence Kotlikoff about his data selection and never gave a cogent answer. He dismissed the questions with, “It must be in the weeds.” Tuerck and Kotlikoff have published papers showing that the FAIRtax rate is ample to replace the income, payroll, and death taxes it repeals. A recent paper by our economist, Dr. Karen Walby, shows that the FAIRtax, when scored properly, brings in slightly MORE revenue than the taxes it replaces.

   - The high sales tax rate could encourage tax evasion and black-market activity, potentially offsetting revenue gains.
(https://www.americanactionforum.org/research/evaluation-and-macroeconomic-impact-of-the-fairtax/)

Ed: Professor Richard J. Cebula of Jacksonville University recently studied this issue. Professor Cebula concluded that, under the current tax code, evasion and non-compliance will be $1 trillion over the next ten years. Professor Cebula cites David Duran’s study for the California Board of Equalization, indicating a high compliance rate for sales taxes.

Also, the great majority of retail sales in this country are made by a relatively small number of vendors (think Amazon, Walmart, Costco and Target).  Any black markets that spring up will be miniscule by comparison  Additionally, the FAIRtax replaces the tax costs that are currently hidden in today’s retail prices.  Consequently, the FAIRtax will not cause a massive spike in retail prices that might drive consumers to black markets.

3. Inflation and Price Shocks:
   - The FairTax would likely cause an immediate jump in consumer prices (approximately 30% at the proposed rate), reducing purchasing power, especially in the first 5–10 years. (https://www.americanactionforum.org/research/evaluation-and-macroeconomic-impact-of-the-fairtax/) (https://www.americanprogress.org/article/the-fair-tax-act-would-radically-restructure-the-nations-tax-system-in-favor-of-the-wealthy/)

   - In an economy with already high inflation, this price increase could exacerbate economic strain, particularly for low- and middle-income households. (https://www.americanactionforum.org/research/evaluation-and-macroeconomic-impact-of-the-fairtax/)

Ed: The cited material overlooks the transitional credit under Section 902 of the bill for inventory and works in progress. At the dawn of the FAIRtax, a seller can sell existing inventory for nearly pre-FAIRtax prices, giving the efficiencies of the FAIRtax time to take effect.

          Next time, we will review the final negative comments from Grok and tell you a true story about an unfortunate attorney who relied on AI. As you can see, Grok can be selective about its sources when making negative comments. Grok would be more credible if it also cited sources that undermine the negative assertions.

          The FAIRtax Guys recently did an episode of FAIRtax Power Radio in which they responded to negative comments about the FAIRtax made by Microsoft’s Copilot AI application.  The Guys reviewed five negative comments from CoPilot. You can view the video at: https://fairtax.org/videos/episode-482-ai-cons-of-the-fairtax.

          I would love to hear about your experiences using Grok or other AI platforms for the FAIRtax.

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[i] Florida does not belong to the handful of states that sponsor disability insurance benefits and deduct that cost from payroll.
[ii] Florida Budget Report for 2025-2026.
[iii] Tuerck, Bachmann, Jacob, “Fiscal Federalism: The National FairTax and the States,” The Beacon Hill Institute, September 2007, at p. 17, Table 3.

[1] You can design your own business card. I had mine printed at https://www.vistaprint.com. Here’s mine. Please clear your design first with our Marketing and Communications Team Leader, Randy Fischer, randy.fischer@fairtax.org. Randy turns requests around quickly. We need to know where our logos and service marks are going.
 


[i] You can design your own business card. I had mine printed at https://www.vistaprint.com. Here’s mine. Please clear your design first with our Marketing and Communications Team Leader, Randy Fischer, randy.fischer@fairtax.org. Randy turns requests around quickly. We need to know where our logos and service marks are going.
 
 
 

[i] The nine jurisdictions with statewide sales taxes but no local sales taxes are Connecticut, Indiana, Kentucky, Maryland, Massachusetts, Michigan, New Jersey, Rhode Island, and the District of Columbia.
[iii] Ibid.
[iv] Fiscal Federalism: The National FairTax and the States, Tuerck, Bachman, and Jacob, The Beacon Hill Institute, September 2007, see the chart at p. 17.
 

[1] The average rates expressed as a percentage of AGI within each jurisdiction are: AL--0.10%; DE--0.16%; IN--0.62%; IA--0.11%; KY--1.33%; MD--2.40%; MI--0.17%; MO--0.22%; NY--1.63%; OH--1.57%; PA--1.23%. In CA, CO, KS, NJ, OR, and WV some jurisdictions have payroll taxes, flat-rate wage taxes, or interest and dividend income taxes. See Andrey Yushkov, Tax Foundation “State Individual Income Tax Rates and Brackets, 2024” February 2024; https://taxfoundation.org/data/all/state/state-income-tax-rates-2024/l See also Jared Walczak, Janelle Fritts, and Maxwell James, “Local Income Taxes: A Primer,” Tax Foundation, February 23, 2023, https://taxfoundation.org/local-income-taxes-2023/.
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