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Let's see if I understand your argument; I make 100K. My employer withholds 20K in income taxes of various types. The Fair Tax folks postulate that retail savings of about 20% will result from implementation of the Fair Tax. The Fair Tax folks believe that the savings stem from the elimination of BtoB taxes, compliance costs, accounting costs, excise taxes etc. You believe that the only way to realize a 20% retail savings is for my employer to take the 20% of my agreed upon salary withheld to pay income taxes to reduce their retail costs.

My employer wouldn't do that. I would receive all taxes not withheld in my take home pay. So...it seems the only issue really in dispute is the behavior of retail prices in response to enactment of the Fair Tax. I have seen FReeper estimates of 1-2% savings to 20-30% savings. I have no idea what the costs of compliance, legal, and hidden taxes are. However, they have some value and the savings may be passed on to consumers. Different businesses would have different costs and that may explain some of the variances.

While I usually agree with you I don't here.

While I usually agree with you I don't here.

I have gone over this in details before, but let me give you a guestimate of what happens. Business save $350 Billion from their share of FICA taxes. Business will save another $200 Billion in Corporate taxes. Compliance costs savings results in another $100-150 Billion in savings. A total of roughly $700 Billion in savings to businesses. The remaining $1.3 Trillion in taxes is paid directly by individuals and will go in their pocket and will not be savings realized by businesses. The tax numbers can all be confirmed from the IRS website. Personal consumption in this country is roughly $10 Trillion. The $700 Billion in savings represents 7% of the total costs of goods. Prices can only come down 7% if employees pocket all their current paycheck. Add a 30% sales tax on to the goods, and prices go up 20%. A sales tax may or may not be a good thing, but as this article confirms, and my analysis shows, and as the FairTax researcher himself, Dr. Jorgenson says, the rhetoric the fair taxers spin is false.

So if you assume paychecks go up, which is what they would under this bill, you must admit prices will go up substantiall too. There is no other way.

The only way to get the 20% savings that the fair tax researcher got from embedded taxes, is if the $700 Billion in Business Savings is combined with the $1.3 Trillion in Individual Savings. That gives $2.0 Trillion, which IS 20% of Total Consumption. And that is how Dr. Jorgenson came up with the embedded tax number the fair taxers have been misapplying for years.

From peteb In post 11

If an hourly worker is working for $10 an hour and the Fair Tax passes do you really think a boss is going to walk up to a worker and say "Hey, the Fair Tax passed, I'm only going to pay you $7.50 and hour

From annelizly in post 32

I could see the employer who normal hires someone for 10$ an hour cutting his pay scale for any new hires to 7.50$. I think this could be a problem. I think that most places will pay the least they have to and if there are people willing to work for 7.50 then they won't pay 10$.

From konaice in post 41

Stop it with the $7.50 nonsense. Its bogus.

From Nucl in post 70

My employer wouldn't do that. I would receive all taxes not withheld in my take home pay.

Using the $10.00/$7.50 example used by so many: Right now you make $10.00/hr. If you would work 10 hours and had to pay 1/4 of that in taxes you get $75.00(take home pay). Under a NST, if your hourly wage was reduced to $7.50 you still would get $75.00(take home pay) for 10 hours of work. Your hourly rate goes down but you still receive the same amount of money for the same amount of work.You are not getting a pay raise or a pay cut. You keep 100% of your paycheck with no withholdings. No free money and no smaller paycheck. That sounds OK to me.

ancient geezer got it right in post post 64

What was wrong was how this was presented by Boortz and the FairTax supporters. They took the assumption that take-home pay would increase (from Assumption 1) and paired it with the assumption that consumer prices will stay the same (from Assumption 2). They mixed the best of both worlds and came up with a windfall, that take-home pay would increase while consumer prices stayed the same, that could not possibly happen. Much of the proported benefits of the FairTax come from this erroneous assumption made by Boortz and the FairTax supporters