Replies

Once again, only two things make up the bulk of taxes paid in this country-- taxes on labor and taxes on corporate profits. These taxes make up the vast majority of the tax revenue in the US.

In 2004, taxes on labor were $1.588 billion, and Corporate taxes were $212 biilion. (there was also $25 billion estate taxes which are negligible for the purposes of this post). The total federal revenue was $1.825 billion. Of the labor taxes, $839 billion were personal income taxes, $374 billion was employee half SS/M, and $374 billion was employer half of SS/M.

So, the money that the FairTax is going to remove from the costs of goods and services is $212 billion corporate taxes, plus $374 billion employer half SS/M for a total of $586 billion. $839 billion income taxes plus $374 billion employee paid half of SS/M is now targetted to go back to the employees in the "keep 100% of your paycheck promise". So, $1.21 billion is being given to the employees as a windfall pay increase, and is not available to reduce costs.

This $586 billion is only 32% of the original taxes that were intended to be wrung out of the producer cost structure.

The FairTax people tell us that 22-23% of the cost of the average goods and services is embedded costs of the present tax system. So, now we are only getting 32% of that embedded cost out, which is 7-8% of the original 22-23%. Adding another $200 billion in compliance savings and we arrive again at the 8-10% savings number I have previosuly estimated for what can be removed from the cost of goods under the FairTax.

Assuming an 8-10% reduction in shelf prices, the addition of the 30% Fairtax means prices paid go up 17-20%, also as I have been saying.

You're changing what you're saying. I have said real prices will remain stable. It is only you who use nominal pricing. Purchasing power must remain constant. So if nominal prices rise, so must wages and/or ROI in an amount sufficient to keep purchasing power stable in the aggregate.

What you WERE saying was that a percent saving at each stage will result in an equivalent percent saving at retail - that is false.

I won't argue about nominal prices changing - they may. But that is immaterial. Purchasing power will remain stable.

Instead of paying 3.50 for a gallon of milk with 10.00 you may pay 3.85 for it but have 11.00.

Why the hoopla about nominal prices?

In 2004, taxes on labor were $1.588 trillion, and Corporate taxes were $212 billion. (there was also $25 billion estate taxes which are negligible for the purposes of this post). The total federal revenue was $1.825 trillion.

Also about 200 million in various federal fees, tariffs, estate taxes, and special purpose excise taxes.