Imports will now share in the tax burden, and their prices will go up. However, this is a good thing.. The cheap chinese imports have resulted in American products losing market share to the cheap imports, and have forced them to compensate for their loss of marketshare by increasing prices to stay alive, if they are even able to stay alive. Thus to get a good quality product in many cases, it's double the price of the cheaper made products. The FairTax would tend to reverse this trend. So even though the imports will go up, American products would be better able to compete for shelf space, and cunsumer dollars, regaining lost marketshare, and therefore be able to come down in price independent of the other beneficial dynamics involved in the FairTax.
RETAIL services will now be visibly taxed, but they will no longer be burdened by hidden corporate, income, payroll or self-employment taxes.
Also EVERYONE will benefit from the fact that non-retail businesses experience a complete elimination of their tax burden, with no new tax to replace it. That dynamic is true for every node in the entire production tree up unto the actual point of sale. Any argument that prices can not go down unless wages increase in entirely inapplicable to non-retail businesses. Everything leading up to the point of sale is able to directly reduce their prices by the same rate as the tax to gross receipts they would have paid under the current system, without altering profits or wages.
Also, because compliance costs are removed as well, more so from some than others, but a net reduction in costs (or a net increase in productivity), there is an additional benefit, at every point of the production tree up unto the point of sale.
Further, individuals would benefit, not only from the decrease in SS payments or Self Employement tax, but income tax as well.
The only point where it is arguable that wages would have to be reduced to their net, is at the retail level. However, this depends on to what degree the reduction of the tax burden for all business will cascade through the production tree in the form of lower prices.
I don't understand. Why would they up? And why is that a good thing?