Under FairTax I will write out the same check for $1 million but it will all be to my employees directly. My payroll costs haven't changed. How am I able to reduce my prices by 20%+ allowing prices to stay the same when the 30% FairTax is added?
You didn't write checks for $1,000,000 before. You wrote checks for $1,075,000, because the employer FICA isn't withheld from the employees' paycheck. That's $75,000 savings you can pass along right there. You also have to take into account the reduction in prices your suppliers are able to give. And, most importantly you have to consider the income taxes and FICA taxes on your own income, whether self-employment tax or the FICA tax on the salary you give yourself.
I believe you may have said before that you didn't want to be a tax collector for the feds? Do you realize from your example that you already ARE a tax collector for the feds? $350,000 worth.
Also, you are using the tax inclusive rate on your prices dropping but the tax exclusive rate for the Fair Tax rate, which makes your claim appear more "impossible" in your eyes, and in the eyes of those you are trying to influence.
You didn't write checks for $1,000,000 before. You wrote checks for $1,075,000, because the employer FICA isn't withheld from the employees' paycheck. That's $75,000 savings you can pass along right there.If the FairTax is truly revenue neutral, there can be no overall savings by someone not paying a tax they were paying before. If they aren't paying with the FairTax, somebody else is - most likely RobFromGa's employee's and RobFromGa himself. They will need the money you say than can use to reduce prices to pay the tax they will now be paying directly.
I covered the 7.65% employer paid portion of the FICA tax in my posts. These are not really paid for by the employer although wage earners like to think that they are sticking it their employers though.
On other FairTax posts, is has been claimed that the 7.65% employer portion would be paid to the employee not retained by the employer as a cost savings. I'll look for evidence of this.
Even granting your point and adding 7.65% of my labor costs which for the sake of discussion are 60% of my sales cost, this would only be another 4% cost savings bringing the total cost savings to 8%. Where is the 23% price reduction I am going to need to keep my prices the same with the Fair Tax added? You also have to take into account the reduction in prices your suppliers are able to give.
Yes I did that was where the 4% cost savings came from in my analysis.
I used the fact that 15% of the cost of the car wash was purchased materials, with a 25% savings for 3.75% (I don't believe that 25% savings but for this argument will stipulate it)
We have an additional 60% labor cost that under your assumption we will save 7.65% on (I think this will be passed on to the employee for no savings to the business but for this argument will stipulate 7.65% savings on labor). This is about 4.5% savings on the cost of the car wash.
The remaining 25% is the business profit which is the shareholders and business owners income and we are not going to reduce that either.
So, we have a total of 8% savings not 23%.
And, most importantly you have to consider the income taxes and FICA taxes on your own income, whether self-employment tax or the FICA tax on the salary you give yourself.
I have considered that and the business owners are going to get to keep all the profits without sharing them with the government by paying taxes. So this is good for the business owner from a profit standpoint if it weren't for the ugly problem that his cost for a car wash is now too high when you tack on the 30% and he loses business.
Reread my examples, I have already discussed these issues you bring up again.