From day one the prices will go down. Retailers get an inventory credit for the taxes embedded in the inventory they have on hand on the day the tax takes effect, so they can immediately lower their prices. Why would they lower their prices? Competition! And where did you get 25-30%? Out of thin air?RobFromGa, their rate also doesn't account for this inventory credit. That's several hundred billion dollars in revenue that the government won't see.
You are right, but the inventory write-off is a one-time charge, I could live with that if the plan would be sustainable as a steady-state program. That can be solved and it doesn't bother me so much.
I read somewhere that they anticipated human nature and that consumers would go on a spending spree in the month or so prior to the effective date of the Fair Tax. That would result in higher profits for businesses therefore a windfall in taxes for the government in the last year under the current tax system. It will be a one time credit. People may buy some things they wouldn't normally buy so there may not be a corresponding decrease in spending after the effective date.
We have tax free weekend in Texas starting tomorrow. You should see the stores! You can't stir people with a stick.