First, there is no difference (other than one you contrive) between an employee and a self-employed businessman. Both get compensation from their activity in the business sector; both pay wage taxes; both pay income taxes as individuals. To suggest that some fictitious difference is a valid reason to expect a self-employed businessman to relinquish a portion of his gross pay that his employees do not relinquish is patently unfair, not to mention unsupportable.
In reality, maintaining constant purchasing power is NOT (and never has been) the goal of business, government, or individuals. And that goal is not achievable unless the FairTax does not alter the distribution of the tax burden. As we all know, the FairTax DOES alter the distribution of burden so constant purchasing power for all CANNOT be a goal of the program. That you can show an example of a situation in which a businessman COULD lower his price to maintain constant purchasing power does not make such an outcome a desirable or likely goal for that businessman.
That you IGNORE the problem of the businessman who can only maintain constant purchasing power by RAISING his prices further than the average suggests the usual cherry-picking that anecdotal analysis requires.
You also IGNORE the fact that if a businessman does indeed reduce his prices more that the saved tax costs that he is actually eroding the tax base used by the FairTax folks to calculate the rate (thereby necessitating a higher rate.)
In the aggregate, prices will increase from 20% to 30% ... yes 30% (not including issues regarding the false claim of "revenue neutrality".) We've been through this before, and you've even agreed in the past that there are situations where a 30% increase will happen (remember that imported case of wine with the free shipping?)
The problem you have is not the averages, it's the distribution of cash flows; they are not uniform. By the nature of income tax, cash in excess of the averages resulting from the elimination of the income tax will go to those business sectors where profits are high and competition is low or nonexistent; cash short of the averages will go to the most competitive, least profitable businesses.
In short, those with least incentive to reduce prices get the extra cash; those with the most incentive to reduce prices get screwed.
[First, there is no difference (other than one you contrive) between an employee and a self-employed businessman. Both get compensation from their activity in the business sector; both pay wage taxes; both pay income taxes as individuals. To suggest that some fictitious difference is a valid reason to expect a self-employed businessman to relinquish a portion of his gross pay that his employees do not relinquish is patently unfair, not to mention unsupportable.]
To which I obviously disagree. There is no reason to treat two business owners differently. A man who runs his own business has made a choice to actively participate by being an employee. Another man may choose a passive role and hire a manager to run everything. Obviously, he would not pay the manager the full profits from the business. Just because owner & manager are one person does not mean you can toss out the logical and economic distinction that there are two roles being filled.
A 'fair' expectation for an owner/manager is that he retain the portion of PIT and Payroll taxes as the equivalent employee would, and retain the net profits that the owner would. To retain the owner's PIT would be double-dipping as compared to the other owner who had hired an employee to manage things.
[We've been through this before, and you've even agreed in the past that there are situations where a 30% increase will happen (remember that imported case of wine with the free shipping?)]
I agreed that if the assumption was no tax costs embedded, then there would be no price reduction available without affecting the maker's profits.
We did not discuss the forces that determine prices, including the maker's need for customers, and the customer's method of assigning a value to a product. Those forces will dictate that the price WILL FALL until the FT-inclusive price equals the same portion of disposable income as it did under the PIT. Essentially, it will fall by the same amount as the domestic product or other alternatives that the customer values equally.