groanup,
Pigdog's cascading chart is malarkey. I do not see where it is possible to achieve more than ten percent savings on domestic items. The bulk of this ten percent is by saving the employer FICA match, which as late as yesterday a number of Fairtaxers were saying was the property of the wage earner too.
I see 6-10%, you see 10-18% cost reductions. So, we are in agreement if the actual number is ten percent. At ten percent, my original bakery example in the BOORTZ/LINDER open letter stands, and the $1.00 loaf drops to $0.90 and then the 30% tax makes the price of bread $1.17.
This will not ever pass because every dollar already accumulated would have its purchasing power destroyed by about 17%. So, the way Dr. Jorgenson understood it is the only viable alternative to discuss: people will receive on average their current take-home pay, and the business will "see" a reduction of perhaps 23% in costs allowing the bread price to drop to $0.77, which will still be $1.00 when the 30% tax is added.
In this manner, everyone is approximately the same as they are now. This is the way I always understood the FairTax and that is why I took offense when Boortz and Linder printed a book with a fairytale scenario.
I am not sure that a consuption tax is the best way to go when it is in the range of 30%, but at least we can debate it. For the record, I think evasion will be the biggest issue to overcome in collecting a 30% tax, especially on services which are often performed person-to-person.
Rob,
Lets take another look at your bakery.
Level 1 is the farmer who grows the grain
Level 2 is the mill
Level 3 is the warehouse
Level 4 is the shipping company
Level 5 is the baker who sell to a retail customer
Another example.
Level 1 is the steel mill
Level 2 is the steel warehouse
Level 3 is the manufacturer
Level 4 is the manufacturer's rep
Level 5 is the production plant
Level 6 is the assembly plant
Level 7 is the retail sale of product
If you don't see how the tax that is imposed on level 1 is compounded each time the next level adds their profit margin, then I don't know how to help you.
Does the manufacturer's rep back calculate how much tax was paid by the manufacturer before calculating his selling price? No, he just adds 10-30% profit on top of the cost to him by the manufacture, and I guarantee that the manufacture passes along the taxes that he paid.