"The problem will come in when it is 30% on top of prices which won't go down much. This will likely wreck the economy in terms of consumption of new goods, which will be bad for tax revenue and devastating for businesses that manufacture goods and provide services."
"In 1997, Congress's Joint Tax Committee began to explore what a fundamental reform of the tax code would look like and what effect it would have on our economy. The Committee discovered it didn't even have a valid model to predict the outcome, because the Committee's models were all designed to nibble around the edges of the tax code. So the committee called in teams of economic experts to model the impact on our economy of replacing the income tax with a consumption tax. What did these teams of economic experts discover? Every one of those nine teams found that a consumption tax would grow the economy faster than the current system. From liberals to conservatives, every economic team recognized the drag that the current system places on our economy. While some of these experts felt that the growth would be rapid and others believe growth would only occur more slowly over time, everyone believed a consumption tax would grow the economy faster than any growth we would experience under the present system."*
* The FairTax Book by Neal Boortz and John Linder, p. 110
They seem to think prices will go down, I don't see how. Any answer for my #259? How will my costs go down as a business under FairTax? I am still paying as much out of pocket for labor, but I give it all to the employee instead of sending some of it to the government. My cost is the same--
Say I am a manual carwash (or any other business with fairly high labor costs)-- how do I reduce my prices by 23% to enable me to add the 30% FairTax and have my customers pay the same final price.