You are buying into the plan's statement that prices will be able to drop, which I believe is not possible unless wages for employees drop by the amount of their income and FICA taxes. The original guy that developed this plan was Dr. Dale Jorgenson. This is the person that the FairTax people are quoting when they say prices will drop about 20-25%. Here is his testimony:
March 27. 1996 (104-46) at http://www.gpoaccess.gov/wmhearings/104.html
"Since producers would no longer pay taxes on profits or other forms of income from capital and workers would no longer pay income taxes on wages, prices received by producers, shown in the fifth chart, would fall by an average of twenty percent."
(the referenced fifth chart is the same basic chart that Boortz used in his book, Fig 5.1)
Sounds pretty clear that he expected the workers to give the money they saved by not having to pay taxes on wages back to the "producer" (their employer) to enable them to lower prices. Jorgenson was under no delusion that the wage earners would get to keep 100% of their current paychecks. He knew they would get to keep 100% of their new smaller paychecks (reduced by about the amount they now pay in income and FICA taxes).
This sentence is inaccurate and not what I meant to say, Jorgenson was the main economist that they used to determine the economic models and simualations of the effects of the plan.
Don't see how they would actually. I just don't see how the amount of money would increase due to the tax change.
People will have to spend more money to get what they want. OTOH, people will have more money to spend.
The question is will there be a real, national, increase in wealth due to less compliance costs and the ending of costs associated with avoiding compliance?
And, will there be increases in economic efficiency due to the lessening of the influence of the tax code on business decisions -- hiring staff vs. independent contractors, the timing of the purchase of capital goods etc?