They are, all told, quite substantial. A more interesting issue, however, is that certain monies that exist today on which tax has already been paid would be taxed again under the new system. The "transition effects" would probably be signifcant, but I don't know exactly what they'd be.
Y'all probably know that radio host Neal Boortz has written a book about the Fair Tax*.
A caller today asked Neal a question today that I thought was very interesting and relates to the italicized quote above.
Simply, the guy said, "In the past I have made and saved $1.000,000. The government has taken $400,000 so I have $600,00 in the bank. All taxes have already been paid on this money. I live in a state that has no state sales tax. If I use some of my $600K to buy something for $100, I pay no additional taxes because all taxes have been paid.
"Now the Fair Tax goes into effect and I go to the store and use some of my $600K to buy something that costs $100. And I have to pay the Fair Tax of 23%. Am I not being taxed twice here?"
Neal stated to answer the question by pointing out that once all the embedded taxes are removed from consumer goods that prices will come down about 22%. So there's really only a 1% difference.
The guy said he know that but even with the lowered price he still had to pay the Fair Tax using money on which tax had already been paid.
I thought, OK, this guy's got Neal but good. It will be interesting to see how Neal explains this. And I was very disappointed.
Neal then launched into his usual spiel about the prebate check. And I guess he cut the guys phone connection as the caller added nothing further to the discussion. Neal talked about the prebate for awhile and a couple of other things and then went to a break.
The point is: he never addressed the caller's concern.
Disclaimer: I am very much in favor of the Fair Tax. Wish It had taken effect Jan 1, 2005.
But this appears to be a significant problem.
Anybody have an ideas on this?
*Hmmm... three links in one sentence. Does that win a prize or anything?