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When the FairTax is implemented, and when business and personal income and payroll taxes disappear, your employer is going to have to make a decision. He will either take some or the entire amount he had been withholding for federal income and payroll taxes and add it to your weekly check, or he will readjust your pay figures so that your entire paycheck will be equal to what you used to call "take home pay" before the FairTax. The employer may also decide to do a little of both.

I'm really confused now. If we workers are selling our services, our wage is the price of those services. That wage is agreed upon in a contract. My understanding was that our taxes come out of the money allocated for that wage, not out of a pool of general money in the employer's hands. If this understanding is correct, the employer can't just arbitrarily lower a salary because taxes are no longer being withheld from it; it wasn't the employer's money anyway. If they wanted to lower salaries, wouldn't they have to renegotiate with every current wage-earner?

Of course, this issue only applies to current salaries/contracts. I can see that things might be different for people starting new jobs.

I hope I'm not being naive here. But wouldn't there also be some savings for employers if they no longer have to do the government's money-collection for them (at least on the payroll end)?

That wage is agreed upon in a contract. My understanding was that our taxes come out of the money allocated for that wage, not out of a pool of general money in the employer's hands. If this understanding is correct, the employer can't just arbitrarily lower a salary because taxes are no longer being withheld from it; it wasn't the employer's money anyway. If they wanted to lower salaries, wouldn't they have to renegotiate with every current wage-earner?

Most employees don't have an explicit contract. The employer can say "Next month there will be a 10% pay cut. If you don't accept that, please report to the personnel office to turn in your resignation." Although I guess that would be considered a form of renegotiation.