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It seems that you are the one who doesn't understand the embedded tax. The taxes deducted from an employee's paycheck do not go to the employer. Where did you get that idea? The taxes deducted from an employee's paycheck go to the government.

The embedded taxes are the taxes that are collected by companies and passed on to individuals through higher prices. If a company is taxed on their earnings, then they will merely raise the price until they are getting what they need to get for each unit sold. If those taxes are removed, then the price will drop accordingly. While this is going on, the employees are still getting 100% of their paycheck, minus voluntary deductions for retirement, etc. So, instead of paying withholding for social security and federal income taxes, an employee will not have these taxes deducted from their paycheck. Instead, the taxes will be paid whenever a purchase is made.

The purpose of the fair tax is not to cut taxes. It is to eliminate the IRS, and all the costly paperwork that goes along with this federal beast, and to pick up new sources of revenue. People who participate in the underground economy do not pay income taxes, but they buy gasoline, bread, cars, jewelry, etc. They cannot avoid these taxes. therefore, income that was not being collected by the government will now be collected.

So, the IRS is gone, prices are about the same, because the 23% is already being paid in embedded taxes that are passed on to the consumer, but now this 23% will only be paid when you buy something. There is no tax on savings or capital gains, estates, etc. Plus, rebate checks are given up to the poverty level for basic necessities. The biggest benefit besides elimination of the IRS is that suddenly, anyone, whether they are a citizen of the US or not, will pay taxes when they shop in the US. That's new revenue. Additionally, even illegal aliens can't escape paying taxes under this method. That's new revenue, because many pay no taxes.

It seems that you are the one who doesn't understand the embedded tax. The taxes deducted from an employee's paycheck do not go to the employer. Where did you get that idea?

From the guy who did the study, Dr. Jorgenson. He included the employees tax when he figured out what the embedded taxes were. Without counting the employees taxes they pay, there is no 22 percent embedded taxes.

I'd suggest you read my letter again with your FairTax blinders off. I never said the taxes deducted from an employee's paycheck go to the employer.

Your post reads like a regurgitation of the book which includes the mis-representation that employees will increase their purchasing power by 25+% overnight with the FairTax.