You persist in arguing against points NOT made!
No one has suggested the PCE counts business-use purchases. Quite, the contrary. It is precisely because the PCE excludes Business-Use purchases that the example works.
The individual portrayed in the example is not acquiring a PC for business use; he's acquiring a PERSONAL USE ITEM. Since there is no tax penalty for purchasing a PC at retail under the Income Tax system, the individual just buys the PC at a retail outlet today. The PCE, the one the FairTax bases its rate calculates its tax rate from includes that PC purchase as a Personal Consumption Item.
In contrast, that SAME individual, interested in acquiring that SAME Personal Use PC is incented to masquerade the purchase as a Business Expense PRECISELY BECAUSE BY DOING SO HE CAN EVADE THE FairTax!!!!! I only suggested the individual used untaxed income to demonstrate that individual's comfort level with tax evasion. Since the FairTax takes away all incentive to evade tax on income, the evader shifts his focus, and CHANGES HIS BEHAVOIR to evade tax on consumption.
He ALTERS his purchase behavior IN RESPONSE TO THE FairTax!!!
His ALTERED behavior, ALTERS the PCE.
For a guy how often berates others for being stuck on static analysis, YOU'RE STUCK on STATIC! (to steal a phrase perhaps more applicable here in its original form!)
His ALTERED behavior, ALTERS the PCE.Yet another example. A retail that is losing a little money or about break even. He pays no income tax because he has no profits. After the FairTax, he charges the full FairTax amount but only submits 80% of his sales.
No one has suggested the PCE counts business-use purchases. Quite, the contrary. It is precisely because the PCE excludes Business-Use purchases that the example works.
PCE expressly excludes Business use purchases by methodolgy. Any purchase by a business is considered to be business use and an investment not personal consumption by NIPA/
That PC purchased by a business but used for personal consumption is not in PCE it is considered investment not personal consumption of PCE.
http://spruce.flint.umich.edu/~mjperry/Unit10.html
"NIPA arbitrarily assumes: All household spending is PCE except spending on housing. All business spending on final goods is considered Investment. "
That computer bought by a business for its employee to take home is assumed to be an investment by NIPA and is not included in PCE at all.
One of 7our examples is that of a business purchasing for an employee that he might avoid/evade taxes, such a purchase is not entered as PCE in the income/payroll tax case, (when such compensation effects avoidance of income taxes on the value of the PC), and it is not entered as PCE for the situation of the NRST.
Your other cash under the table scenario then purchasing the PC in open market, leaves the numerator (i.e. government revenues lower than they would otherwise be, thus the rate calculated against PCE remains revenue neutral with respect to revenues that are actually collectible.
You overlook that the one receiving the under-the-table cash payment is indeed a business, if an under-the-table cash transaction is in the works by such a business to evade the income tax, it is by no means a stretch that his purchase of a personal use PC would be as a business expense achieving even greater worth and scope as a means to evade under the current system. That PC would not be counted under PCE as it is most likely declared as a deductible business expense item used to minimize taxible income arising from tracible business sales of that rather nefarious tax evading business person.
You hypothetical is marginal at the very best light, and easily offset by other transaction that obviously must go the otherway in folks erroneously declaring less business expense than they otherwise qualify for in tax deductibility of the income/payroll tax system.
Sorry, just don't by your marginal hypotheticals at all when the obvious cases abound all around us in the current system that act to reduce PCE below its real value rather than increase it. It is far more probable for PCE to be lower than real taxable consumption, than it is for it to be higher by a very wide margin simply due to the lacks in methodology for measurement of PCE to begin with. The static revenue neutral tax rate computed from the PCE base represents a clear upper boundry to the tax rate for the NRST with much greater certainty than it represents a lower boundry.