I disagree......
The annual compliance cost savings, estimated to be in excess of $200 BILLION a year, will yield real increases in purchasing power on day one. Moreover, as the US attracts capital, real wages will increase....thus increasing purchasing power over the long term.
I understand the savings of compliance costs, but I thought we were talking specifically about the employer portion of the payroll tax. The compliance costs of that are negligible.
Overall compliance cost is an area of potential price reduction. What we need to look at is the
difference in compliance costs between the current system and the proposed. That is the savings that could possibly be seen in prices. The compliance costs of a NRST would be
much lower than the current system. How much is the question.
As you probably know, compliance costs estimates are all over the map; it's real easy to come up with any number you want. Joel Slemrod put the number for 2003 at $110 billion for
both personal and business income tax. I would be shocked if the actual federal tax compliance costs for business were over $100 billion. The FairTax gives businesses 0.25% of taxes remitted for for FairTax compliance. What the actual number is is difficult to say.
A related issue is administration costs. The 2001 budget for the IRS was ~$9 billion. The FairTax gives the states another 0.25% for administration costs, that's ~$6 billion, but that doesn't cover the cost of Treasury (the new Sales Tax Bureau) to coordinate with the states and it doesn't cover the cost of administering the Family Consumption Allowance. Mailing out a check once a month to every family in America is no small task. It's impossible to know what these costs would be but I think it's safe to say that it would be at
least the ~$3 billion difference between the IRS budget and what the FairTax gives the states, and I would guess probably more.
"...The compliance costs of a NRST would be much lower than the current system. How much is the question...."
I agree wholeheartedly. And I suspect that total costs, including the administration of the prebate, will in fact be much lower than the total costs we incur today....although precise measurement will prove elusive.
In addition to the nominal dollar benefits, we should see rapid growth resulting directly from removal of entity level taxation. Moreover, IMHO, the liberty enhancing benefits of this system of taxation cannot be overstated, but it is impossible to value liberty in dollars.....some would say it's priceless.