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What your post describes is actually a reduction in costs of the goods.

Actually the question is how can that reduction in the costs of goods be caused by elimination of income taxes? I'm beginning to believe that prices will not fall much when embedded income taxes are removed from the pipeline of goods and services.

Which leaves me reading tea leaves again. If prices don't fall the immediate effect will be a 30% increase in prices of every thing except used goods. First year there will be a huge tendency to buy used goods over and above the first 15-20 thousand of the pre-bate. A sudden sharp decrease in consumer spending could be temporarily disastrous. Also, it would create a huge deficit at treasury. Of course, all of this can be dealt with by phase in or other means.

I still think the long term benefits of a NRST outweigh the negatives.

"...I'm beginning to believe that prices will not fall much when embedded income taxes are removed from the pipeline of goods and services...."

That is probably correct, HOWEVER, once the cost of entity level taxation is removed, THE BENEFIT MUST ACCRUE TO SOMEONE....inversely to the group that now bears the true or ultimate incidence of the corporate tax.

Again, the ball to watch here is TOTAL PURCHASING POWER.

If prices drop a little, wages increase a little and your investments perform a bit better, you'll likely be able to purchase the same basket of goods based on the combined effect of the changes. Whereas that is a more accurate statement of the net effect, MOST, in fact very few will probably take the time or have the inclination to understand how the incidence of taxation is really allocated. I'm not so sure that it is worth spending the time to explain at this level of detail. The diehards still posting to this thread are up to the challenge.

You really have 3 areas that are eliminated.
1) Personal withholding (matched by employer)
2) Corporate compliance cost
3) Corporate income tax

By eliminating the withholding, your take home pay increases. By eliminating employer matching either your pay increases or the employer's cost decreases. By eliminating compliance costs, the cost decreases. By eliminating corporate income tax, cost decreases.

I suspect you might have forgotten the 3rd element. Either way, the decrease in cost can either be used to increase profits or to decrease price. Given a free, competitive market, the price will fall.

The actual percentage of cost reduction can be debated and has been debated. However, it is clear that a cost reduction will occur.

The elimination of witholdings from wages (PERSONAL income taxes and SS tax) will not reduce product costs provided the gross wage stays the same. However, CORPORATE income tax, and Payroll taxes (the employer' matching payment of SS tax) would reduce the cost.

For any given company, the total amount of tax paid under the old system, divided by the total amount of reciepts, is the rate at which reduced taxes (Corporate & Payroll) would allow said company to lower their prices and still keep everything else the same.

HOWEVER, because all the busniesses that compose that companies non-wage expenses would experience similarly, there would be a cascading effect that would also reduce his other costs. In your example earlier, I demonstrated that presuming your 15% margin company whose payroll was half of his costs, represented the average busniess, it's savings in taxation (including cascading savings from it's suppliers) would experience a savings of nearly 17%. It was a hypothetical example, but demonstrates the effect of cascading taxes under the current system, and how cascading the discount into the other costs, your predicted 9.75% was increased to nearly 17%.

If the national average of tax savings, including cascading cost benefits from tax and compliance costs eliminations, are less than 23%, then the argument that prices would have to rise are valid. If they are 23% or above, then the argument is incorrect... I think. :o)

Keep in mind there would be no sales tax to offset the direct reduction in cost until it was at the retail level. So there is no reason whatsoever to claim non-retail prices could not fall. The issue is if the sum of all reductions throughout the entire production tree, would allow for 23% price reduction at the Retail level.

There is currently an estimated 60% non-compliance with the current tax code, which presumably would be argely remedied, especially in the case of foreign visitors(legal and illeagal). So there is room for the broadening of the tax base to compensate for what might look like a misallocation of SS & income tax to the wage earner's buying power. I think the broadening of the tax base should at least partly compensate. Further, the price of imports will go up, and presumably yield marketshare to American made products, allowing their price to come down.

"...A sudden sharp decrease in consumer spending could be temporarily disastrous. Also, it would create a huge deficit at treasury. Of course, all of this can be dealt with by phase in or other means...."

I think you are correct, and this concern has lead me to question the prudence of doubling or tripling the "prebate" for some period of time, and gradually reducing it during a phase in period. I think this approach would allow the embedded costs to be wrung from the supply chain while allowing consumers the same, or perhaps greater ability to purchase for some time. It would involve a short term deficit, but I think it may be necessary to combat the initial sticker shock. ....just thinking outloud here.....