And several hundred billion more in compliance costs. And couple that with the billions spent by individuals to comply with the tax system which will increase their purchasing power, along with no longer having money withheld for federal taxes on their pay check.
And I am still waiting for you to show me where in the Fair Tax bill states are required to abandon their income taxes and switch to a sales tax. Where is it?
The $250 Billion number thrown around is mostly time spent by individuals filling out forms and record keeping based on IRS numbers (which I never take nearly as long as they say). Even granting that that number somehow would factor into businesses reducing costs (which I don't see how for most of it is individual and not business), that still only allows prices to come down 12%, far short of the 30% sales tax.
Most of the argument between FT fanatics and their opponents has been whether there are enough real savings in compliance costs to allow (a)the Feds to get their whack, (b)the employees to keep their gross salaries, AND (c) retail prices not go up. I don't believe there are enough real savings (not phony savings like counting up the time a guy spends doing taxes instead of watching TV @ $25/hour). However, let's bypass that argument for the moment and assume for this exercise that you FT fans are right, that there is, say $600B, in real potential savings.
What are these costs? They are almost entirely labor costs -- tax accountants, their clerks and secretaries, etc. If you can wring these costs out immediately and to the tune of say $600B, then perhaps retail purchases will not go up by the 25-30% or whatever of NSRT. (It has to be immediate because otherwise the cost of retail purchases will go up before the compliance costs can be wrung out of the producer costs). Therefore, for the FT believers' scenario to occur, about $600B worth of labor has to be dropped -- either laid off or immediately re-assigned to other tasks. It's impossible to do the latter quickly enough to prevent purchase costs from going up, so they will have to be immediately laid off. Now $600B represents a huge number of people, and corresponds to a sharp increase in unemployment rate from about 5% to about 17%!. Now I am concerned about a depression.
However, what is most likely to happen in real life is that the retail purchase prices will go up by about 30% due to the NSRT, before any savings can be realized, unless those savings are realized by immediately reducing employee wages to about the same level their take-home pay had been after IT withholding. That might be implementable quickly enough to avoid retail price increases.
Therefore, from this analysis, even allowing, just for the sake of argument, FT Faith claims of huge real potential savings in compliance costs, one of three things could happen: (i) either retail purchase prices go up 25-30%, due to the NSRT, before producer costs can be reduced, (ii) take-home pay remains the same, or (iii) we get 17% unemployment, and thus a depression.