One "little" problem. Dr. Jorgenson's study which calculated the 22% embedded tax included the employees' income and SS taxes (both halves) as expenses for the employers. Therefore for prices to stay the same after the Fair Tax is added, each employer will have to keep the pay the employees would have paid in for income taxes. Employees will keep their entire paychecks, but those checks will be smaller than their current ones.
Essentially correct in that the NRST replaces the current income & payroll taxes, an in that it is wash overall.
There are gains however in the overhead and deadweight costs associated with the income/payroll taxes system that are substantially reduced under a retail sale tax system providing increased cost efficiencies allowing some lowering of prices with tax that otherwise would not exist. That provides an overall increase in the individuals purchasing power.
What I see as the most likely scenario is that gross wages stay pretty much the same as most are earned under contract and not subject to change on a whim.
I would expect total amount paid (accounting for tax) for consumption would fall 5-10%, while we receive our full checks with no withholding plus whatever FCA sales tax rebate provided for in the bill a household qualifies for.
I would expect total amount paid (accounting for tax) for consumption would fall 5-10%, while we receive our full checks with no withholding plus whatever FCA sales tax rebate provided for in the bill a household qualifies for.
I concur. It will take a few years for labor prices to normalize within each industry's market.