Assume for the sake of argument the labor tax (income tax, employee and employer Social Security tax, and employee and employer Medicare tax) adds 25% to the cost. The sales price is $1.25.$1.25 after taxes.
Now assume a 25% retail sales tax in lieu of an income tax. The U.S. good remains at $1.25.$1.25 from wages reduced 20%.
Same price from reduced wages...No advantage for the taxpayer/consumer there.
Maybe they figured out a way for the rest of the world to pay us for the goods they produce....
Take home wages are not reduced.
Some speak of keeping 100% of your pay. If we assume that, everyone will have more money, but production costs will be the same. But the extra take home pay will offset the sales tax in a revenue neutral scenario.
Others speak of reducing costs of production, but this also means reducing topline wages, so things will cost less, but there will be no increase in take home pay.
I know of no Fair Tax scenario where someone will take home less pay. Also, given the Fair Tax's plan for the Fair Tax to replace Social Security and Medicare Taxes, it does mean a 7.65% reduction in labor costs even if the employee keeps 100% of their paycheck.
The numbers really do not matter. In a revenue neutral situation, it will be a wash. What matters is the collection point. And moving the collection point to after production does change the economics of domestic goods versus imported goods. Likewise, it does change the current economics of illegal labor versus legal labor.
What continues to surprise me are people who politically are opposed to manufacturing moving overseas, and are politically opposed to illegal labor, but also support the current income tax over a national retail sales tax.
A flat tax could help, but as a tax imposed prior to production instead of after production, it has the same problem the current income tax with respect to domestic goods versus imported goods, and does nothing to the economics of illegal labor.
My guess is what will finally move the Fair Tax up in mindshare is when the anti-illegal immigration movement realizes the Fair Tax is a critical step to addressing the illegal immigration problem by changing the economics of illegal labor.
The other thing which will help the Fair Tax is when union members realize the Fair Tax would help the manufacturing economy and press their unions to support it.