I was very careful to not claim all embedded taxes would be removed. Employees still get their gross checks which leaves some embedded tax. However, removing corporate income tax, employers share of SS and the associated compliance costs will result in major cost savings. I trust the free market to reduce prices in response to lower costs in a competitive market.
Of course "X" excludes food and energy price increases.
And, of course, X is adjusted periodically, as is any index related to the cost of living. And the adjustment lags behind any change in prices. So how does this make the FairTax refund adjustment inferior to any other cost of living adjustment?
You are expecting perfection in a replacement for the income tax, for crying out loud. Please tell us, with all its perceived imperfections, how the FairTax is inferior to the our present income tax.
To claim major cost savings by eliminating corporate income tax when 61% of US corporations pay no income tax now is pure fantasy.
Likewise, to figure that the employee will receive their gross pay after the FairTax, particularly when employers are treated differently under the FairTax is also wishful thinking. For instance, if government pays the 30% FairTax on certain employee wages, and the employee gets his gross pay, the cost of those employees has just increased by 30%. Either the employee gets a pay cut, the cost of government goes up, or government employees get laid off.
And, of course, X is adjusted periodically, as is any index related to the cost of living. And the adjustment lags behind any change in prices. So how does this make the FairTax refund adjustment inferior to any other cost of living adjustment?
The point is that as food and energy prices increase, so does the FairTax. We're paying close to $4 a gallon for gas where I live now, the FairTax would add another $1.20 to the current price without a concomitant increase in the prebate. Do you think that gas at $5.20 a gallon would increase economic activity, or slow it further?
One very big disadvantage to converting from the income tax to the FairTax is that it would have a profound impact on every aspect of our economic lives. The devil is in the details, as they say. The bill doesn't define, for instance, what part of withholding and payroll taxes goes to the employer and which to the employee. While you imagine that 100% of your paycheck means gross pay, your employer might imagine it means your current take home pay so that he can fulfill the FairTax promise of lower prices and the company that employs your plummer decides his prices remain the same with the 30% tax added to current prices.
Simply put, the income tax is a known, imperfect as it is. We don't know what the transition costs of the FairTax might be, or unintended consequences as all that isn't defined in the bill shakes out. You may think you're willing to pay the price now, but how do you know until you know what the price is?