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