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There is a calculated (Lindner and Boortz)income tax component in all new goods and services transacted in the US domestic marketplace. Granted, a healthy portion of those goods or services may have their origin outside of the US. However, they are imported, they are warehoused, they are subsequently wholesaled and distributed; generally by US enterprises. Each step in that supply chain is a commercial endeavor planning to make a profit. In addition, they employee staff and employees to one degree or another. The economic planning that sets prices, AT THE RETAIL LEVEL, then, by default bears the burden of passing along all those costs (mostly labor costs)to the end consumer. By taking out ALL of the income tax implications, we have an immediate 'cushion' in the pricing structure of approximately 20% to 26%. This is reflected in all goods and services transacted in the marketplace.
Interestingly, the Fair Tax plan is specific, and is collected only at the point of final sale to the end user. It is important to note that the Fair Tax is not a VAT. The implication, obviously, is that there is NO tax paid/collected on goods that represent 'raw materials'. However, the office supplies used in business, the utility services, and so forth, would be subject to the FT.
I mentioned benevolent greed in my earlier post. That mechanism is one of the prime movers in pricing structures. No business person in their right mind would pass up a chance to snag market share by dropping prices. That pressure, alone, would be sufficient to drive prices back by the amount of the currently included income tax burden embedded in all the raw materials used in the business, once the FT is in place.
It seems to me that the end result of enabling the Fair Tax would be a very short bubble during which prices would be in flux, while businesses work through existing inventories and incorporate the new model into pricing structures. Subsequently, prices would stabilize over another short period of time; to an equilibrium point.
Another point of your post discusses the international sources of many of the goods in our economy. We must believe that there is some economic benefit to businesses to locate manufacturing outside the US, or to source goods from beyond our shores. Of course, that benefit is net landed cost into the US, compared to the cost of manufacturing the same goods domestically. The Fair Tax, by removing the income tax burden built into current business models would represent an immediate 20-26% improvement to the cost structure, compared to the current cost of those same imported goods. While not every industry that currently imports would see immediate dollar for dollar comparability. I believe that the FT would, in fact, go a long way to making US goods more competitive in the world marketplace. The upshot would be better competitive strength of domestic goods, globally.
Another plus, here, is that the money that is currently being pushed offshore to avoid income taxes would, in great measure, now be returned to the US. This would soften the money markets, bolster investment capital, and reduce interest rates. A large portion of these returning funds would be dedicated to research and development of new products and whole new industries. Perhaps, even, we could ultimately develop alternative energy sources that would reduce our dependence on foreign oil, with all the attendant downside.
You mentioned service industries, too. Service industries work on pricing structures, just like hard goods industries. In the service sector, though, the single largest component of cost is the labor paid to make the service available to the market. Current service employers are burdened with the 7% FICA tax (also paid by the employee), plus the anticipated 15% or more in anticipated income taxes to be paid on 'profits'. By removing these components, the Fair Tax would allow the employer to better plan at lower cost, which would yield lower cost to the consumer, ahead of the embedded Fair Tax, which would take the cost (to the consumer) back to near current levels, but with no income tax to be paid on profits (until the business spends some money on new goods and/or services, anyway).
You wrote: "If a domestic manufacturer/business strips away "the income tax implications of the current commercial economic model" s/he would then have to deal with the 30% sales tax implications (price increases) at the other end...simply manufacturing something cheaper only to be heavily taxed at the other end is hardly a solution."
Stated simplistically, your argument looks valid. However, if you also realize that ALL the other goods and service you consume are on the same level playing field, and we get past the 'bubble' I mentioned earlier, you would see that you will be paying very close to the same as you are paying currently, with the added benefit of no income tax on your profits (or the full boat FICA, over 14%). So your notion of "heavily taxed at the other end" doesn't well hold up to closer examination.
The Fair Tax model addresses your very real concern.