I don't think you fully understand the concept "embedded taxes".
Bob's Bakery will no longer have to pay either the employer portion or the employee portion of payroll taxes. The employee taxes, which are withheld from George's wages, are not an expense to Bob anyway. Bob pays George the same amount of money whether he withholds taxes or doesn't. George pays the tax, not Bob.
You forget that Bob the Baker pays income tax on his profit from sales. Businessess pay no taxes under the Fairtax. That is his main source of savings that he would be able to pass on to his customers. If Bob is feeling greedy and doesn't lower his prices, competiton from Jack's Bakery, who has the same tax savings and has lowered his prices, will force Bob to do the same or go out of business. That is unless Bob has really great cinnamon rolls.
Only a handfull of people would lower their prices.....It has nothing to do with GREED.....you work for money and would take more if offered, then you are "greedy" also...Why is it just the business owner who is greedy? If you are not greedy, then cut your own pay by 25 % tomorrow and have it sent to the needy......
If there were a Fair Tax, everyone would be waiting around for everyone else to lower their prices first and no one would ever do it...No one would cut their own salary, so businesses would not cut their prices..
Besides: The Gov-ment always wants more and the locals would raise their taxes to get any real savings if there were any..
"You forget that Bob the Baker pays income tax on his profit from sales"
Bob the baker is probably a sole proprietor or his business is a partnership, or an LLC, or a Subchapter S corporation, in which case, Bob pays personal income and payroll (although they're called self-employment) taxes on his income, which is the profit that he takes from his bakery. But in these cases, Bob pays no corporate income taxes. At all. Only Chapter C corporations pay corporate income tax, and most small businesses (in fact, most businesses) do not choose this form. In fact, in 2000, of 27 million business entities that filed a business tax return, only 2.2 million were C corporations. The rest owed no business income tax.
So, he is in the same position as any other wage earner - he pays personal income taxes, but not any kind of business income tax. He fills out a 1040 for his personal income taxes, like anyone else.
If Bob doesn't get to keep his personal income taxes, like everyone else does, then that puts Bob at a disadvantage to everyone else.
That probably isn't good for encouraging the formation and maintenance of small businesses.
The Status Quo Lover crowd will tell you that only C-corporations pay taxes and that those are "minor" and that no other business can have cascading tax costs.
Obviously, none of that is correct, but they'll keep right on insisting it is so (and citing their own businesses, conveniently, as "proof").
The cascading effect of embedded tax costs continues as even a simple example has shown and the build-up effect mounts up rapidly. None of these guys can admit that this occurs as it destroys their argument.
Also note that in his letter to Linder the poster fails to figure in the effects of the prebate which ALSO helps the wage-earners ... and all others. All-in-all a very poorly-reasoned letter and I would be surprised if they even bothered to answer the allegations he makes, many of which are grossly in error.
His employees get their whole paychecks including FICA and payroll, but the owner of the business doesn't get to keep his whole earnings and is expected to give up his income tax savings? This would not be fair and it would mean wage earners take-home income would rise significantly as related to the business owner. That doesn't sound "Fair".
Businessess pay no taxes under the FairtaxService businesses would...
(Denny Crane: "Sometimes you can only look for answers from God and failing that... and Fox News".)
The current "employee pricing" in the automobile industry shows that. You're also forgeting about the individuals Bob's Bakery hires (that would not increase productivity yet need to be included in costs) to be compliant to todays taxes.
"Businessess pay no taxes under the Fairtax. That is his main source of savings that he would be able to pass on to his customers."
For many businesses it is not just the income taxes that they pay but the cost of keeping records for the IRS, tax accountants, tax lawyers, and all the other overhead that is eating them up. As a part time electrical contractor my wife did the book keeping but her time is worth something. Tax accountant: $5375.13 + IRS: $3291.04 + bookkeeper + FICA was all money out of my profit that I would not pay under the FairTax. However, the money I would save by not paying my portion of the FICA would not go to my customers but to my employees. Then again, I would no longer be paying self employment taxes and that is another savings could be passed on to the customers.