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I figured ZERO income tax on the ROI after retirement at age 65. That's less than your 5%, right?

0% on a number lower that it would be. Golly, how fair of you.

I alloted the full employee+employer side 15.3% of SS/M tax as the tax paid under the income tax

Why would you do that? If you don't increase the person's income by the amount of the employer side of SS/M you are overstating the impact of the payroll tax. (Oh, that's why you did it.) And if you do increase the income by this amount, the total SS/M paid isn't 15.3%. The employee's 7.65% is an inclusive rate, the employer's 7.65% is an exclusive rate. You can't just add them together.

since I was allowing for ZERO price drop, and hence ZERO embedded taxes in prices, I counted the entire SS/M tax as falling on the individual.

You are making assumptions without support. You are assuming that if prices drop (yet another unsupported assumption) that they would be equal to the employer portion of SS/M.

My calculation was based on unmarried filing single, with a current $12K mortgage and $2K property tax deduction.

Your's is not what I would call a typical scenario for people approaching retirement.

I know the $35K is right because THESE ARE MY OWN PERSONAL NUMBERS for 2005. The only part that doesn't match my life is the age. Other than that, this IS my FACTUAL situation, not a guess, and not a hypothetical at all.

You may want to take your taxes to HR Block next time. A person with $125,000 salary putting $15,000 into a 401(k) would have an AGI of $110,000. Minus the $14,000 in itemized deductions and $3,200 in personal exemptions, their taxable income would be $92,800. The income tax on this amount would be $20,490. That's 16.4% of $125,000. The SS/M on $125,000 would be $7,206. Together with the PIT, that's $27,696 - or 22.2% of $125,000.

The only way to get to $35,000 is do what you did and double the SS/M, but then you have to adjust the person's income up to determine what is left to invest - so it cancels itself out. Basically, your example reduces the amount of after-tax money available to invest by ~$7,200 a year.

Eskimo's argument was only on the already-taxed savings, so I didn't address the pre-taxed savings at all.

Your example puts $15,000 a year in pre-tax savings - how can you say you didn't address pretax savings.

Again, your analysis is lacking.

For the self-employed, the $125K gross DOES include a 15.3% SS/M tax. Sorry if that wasn't clear. I figured no price drop because I wouldn't be passing along the employer-side 7.65% tax as a savings to my customers in lower prices. I didn't want to bring any assumptions about price drops into the example. That means retaining all the taxes I currently pay -- including both the full 15.3% SS/M tax on the first $90K and the 2.9% on the remaining $35K.

I was trying to keep it a simple example. If you want to get more detailed, I'd have to exclude my mortgage and property taxes from the spending subject to FairTax -- so only $53K of the spending is subject to FairTax instead of the full $70K. Which would allow me to save $25K per year under FairTax rather than the $20K in the example. And I should include the FCA and put that $2K per year into the savings as well. So I'd have $27K going into that savings account each year, and it would be worth $766K after ten years rather than the $670K in the original example. My monthly withdrawals can be $5,400 under the FairTax rather than the $2,800 under the PIT.

My example may not be typical but there are plenty of people like me. Eskimo's statement was "anybody over 50 with savings" should fear the double-taxation effect of the FairTax. Clearly, there are lots of people that don't need to fear the double-taxation effect at all.

[0% on a number lower that it would be. Golly, how fair of you.]

What does this mean ? What number should be higher than I used ? Are you suggesting the interest income from the savings should be higher ? I used the same 7% rate of return for both Income Tax and FairTax systems.

Here are the calculators I used. I encourage everybody to use them so they can understand the compounding effect of saving tax-free. Plug the result from the first calculator into the second so you can see how long that savings will last you through your retirement.

Savings build up:
http://ww2.abc13.com/Global/story.asp?S=1122978

How long will savings last: http://www.fincalc.com/ret_06.asp?id=12221