[Your Nightmare]

can you elaborate on his pov?

Because a company producing widgets gets the materials they use to produce those widgets for 22% less does not mean the final retail price would go down 22% - there are the company's production costs, wholesale, distribution, and retail costs among other things. But we are led to believe by the supporters of the FairTax that consumer prices would drop 22%.

Producer prices also don't include services and, since the 22% producer price reduction is for US companies, imported items would not see a reduction in price due to producer prices. Services and imported goods are a larger portion of our consumption than domestic goods. So, even if consumer prices for US products went down 22%, the price of our total consumption would not go down nearly that much. But, again, this is what we are led to believe.

[balrog666]

Services and imported goods are a larger portion of our consumption than domestic goods. So, even if consumer prices for US products went down 22%, the price of our total consumption would not go down nearly that much. But, again, this is what we are led to believe.

Well said. And add to it that items previously untaxed by sales taxes (namely food, drugs, etc ) will now be taxed.

[ancient_geezer]

Producer prices also don't include services and, since the 22% producer price reduction is for US companies, imported items would not see a reduction in price due to producer prices. Services and imported goods are a larger portion of our consumption than domestic goods.

Hmmm, need to fill in the service sector too I guess.

Unfortunately the analyst of the below piece does not cite his sources in this writup, His comments do at least suggest that service sector prices can fall as much as goods. Especially considering the 22% decline in producer prices was predicated on an NRST that only replaced income taxes where the Linder NRST in HR25 replaces payroll (SS/Medicare) taxes as well.

PDF:American Farm Bureau Analysis of Fair Tax Proposal

 

December 1, 2003
Ross Korves, Senior Economist
Economic Analysis Team American Farm Bureau Federation

An Economic View of the FairTax Proposal

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Decline of Prices with the FairTax

The FairTax proponents have stated that the prices of goods and services would decline by about 25 percent with the implementation of their plan. That would be offset by the sales tax that would be added when purchases are made.

Consumers of goods and services pay all of the current taxes imposed on productive activity in the economy. The retail price of a bar of soap has embedded in it all of the property taxes, payroll taxes, income taxes and excise taxes paid by the manufacturing company, the wholesale company and the retail company. The same is true for the taxes paid by a dentist and all of his or her suppliers that are involved in filling a tooth. Studies from Harvard University estimate that about 22 percent of the prices of goods are taxes and 26 percent of the prices of services are taxes.

Competition will force companies to lower prices by the full amount of the reduction in embedded taxes. Consumers will be able to make a direct comparison between the old prices with embedded taxes and the new prices plus the retail sales tax.

[Chilldoubt]

even if consumer prices for US products went down 22%, the price of our total consumption would not go down nearly that much.

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what are your reasons for this position? please provide link/source