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LOL, this article confirms everything I have been saying about the 'fair tax' for 6 years and has been denied by fairy taxers!

The painful truth

Toward the end of The FairTax Book, there's a handy little box summarizing what the authors say will happen if we make the switch to a sales tax. Here are the first three points:

We start collecting 100 percent of our earnings in every paycheck.
We all get virtual raises, since payroll taxes are no longer siphoned

From our checks.

We all start receiving monthly prebates equal to the amount of

Consumption tax we would be expected to pay on life's basic necessities.

This sounds pretty good. Of course, we know that it isn't nearly as big a gift as it seems because we'll have to pay some of it back in taxes when we buy things at the store, right? Er, apparently not. Boortz and Linder write:

The prices of consumer goods and services remain essentially the same, with the removal of embedded taxes compensating for the added consumption tax.

We'll explain this bit about "embedded taxes" in a moment. But first, let's consider what Boortz and Linder appear to be saying. Prices at the store are the same. Your boss stops taking all that money out of your paycheck. Uncle Sam is sending you money instead. And, oh yeah, the government is still up and running.

This just can't happen. "It is practically and logically impossible for the government be collecting the same amount of money as before and have everyone suddenly be better off," says Daniel Shaviro, a tax law professor at New York University.

Part of the problem is the way Boortz and Linder are using the idea of embedded taxes. In an eight-year-old study paid for by AFFT, Harvard economist Dale Jorgenson noted that because the taxes paid by everyone in the chain of production are embedded in the cost of goods, prices could decline an average of 20 percent if all those taxes were scrapped. The FairTax Book devotes an entire chapter to this idea.

What The FairTax Book fails to mention is that prices can only fall this sharply if companies cut wages. I asked Jorgenson about this, and he agreed. Say your salary is $100,000 a year today, but you take home $80,000 after taxes.

Your company is still paying that extra $20,000. In a FairTax world, it will save that money, and be able to lower its prices accordingly, only if it can reduce your salary to $80,000. In other words, your take-home pay is the same as before. Sure, you'd get to "keep 100 percent of your paycheck," as Boortz and Linder repeatedly write, but it would be a smaller paycheck. That's kind of a big thing to leave out.

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.

It's certainly good that you don't call names as you're always accusing the FairTax supporters of doing - otherwise I might think "fairy taxers" was not just a typo.

It's hard to understand why you keep posting and hyping this nonsense from the liberal reporter who hates Boortz AND the FairTax, who quotes only well-known virulent opponents such as William Gale of Brookings, etc. and never presents anyone in favor of the FairTax in anything but an unfavorable light - much as you SQLers attempt on these threads. The reporter even quotes a liberal tax law professor with an economic interpretation (that happens to be wrong) to attempt to bolster his weak piece.

The writer is as misinformed as are you as to what embedded taxes are ... he, like you or your hero Robbie, hasn't a clue. You all keep trying to pretend that anyone supporting the FairTax is nothing but badly misrepresenting the FairTax and its benefits. That's not true; it is you Squirrels that are doing that trying to all sorts of scenarios and "discoveries" that are not discoveries of anything at all but merely your own warped opinions and interpretations.

You have even misstated what the economist Jorgenson has said plus the representation that all of the FairTax is built upon his interpretations (as you interpret them). That's nothing but piffle and you know it.

You continually hold any FairTax supporter out to be a liar, dishonest, stupid, etc. and yet it is always your representation that the FairTaxers are doing the namecalling and denigration. BS!!

This reporter that now has you drooling and gurgling over HIS misstatements and misinterpreatations (and half-truths) is no more correct than your idol Robbie whatsis a few threads ago who in his overreaching vanity posts put out the same trashy interpretations.