Well since I already have a service business I can tell you matter of fact.
If my current service rate is $100.00 an hour, after the new "gross payment tax" my rate would have to be $130.00 an hour.
Why?... Because I would be required to collect and remit 23% of my gross income and because the employee is expecting to get 100% of his/her wage with no deductions...no price cut there...Also, though I would no longer have an income tax, I still would have to pay the exorbitant sales tax when I choose to spend my money...Again, no price cut.
Well since I already have a service business I can tell you matter of fact.
If my current service rate is $100.00 an hour, after the new "gross payment tax" my rate would have to be $130.00 an hour.
Why?... Because I would be required to collect and remit 23% of my gross income and because the employee is expecting to get 100% of his/her wage with no deductions...no price cut there...Also, though I would no longer have an income tax, I still would have to pay the exorbitant sales tax when I choose to spend my money...Again, no price cut.
I suppose to begin with in the transition period, you may price your product accordingly, but with price cutting by competitors I doubt you would be able to maintain the higher price based only on the tax. Like the war in Iraq when one system/regime changes there are some pains.Competition will equalize the market in short order and prices will come down whether you lower yours or not is up to you, but to be competitive you will have to meet the market.
Your employees may expect the same net pay, but certainly you can chop off social security taxes & medicare taxes from your overhead and theirs, thus their gross may decrease but net remain the same. Your costs of compliance & payroll costs will go down allowing you to charge a lower price and make the same profit margin. How much of the $100 per hour is payroll costs? over 15% of the employees rate, maybe $ 3-9 dollars an hour, 3-9%? Eliminate that and what do you get? How many hours and how much money do you spend per year complying on a business and personal level with current tax laws and how much would you spend under a NRST? What does that cost you per hour of services you provide, another 5%? Is your time a freedom worth anything?
As for payng the exorbitant sales tax, it would be on products or services that are reduced in price by competition and lower costs.....not so exhorbitant after all IMO if prices dropped only 15-20%....
Will you spend all your money or save some of it? You will only pay consumption tax on that portion you spend. Will your effective tax rate be higher or lower, considering the rebate and the loss of all payroll taxes including SS? If you save money the interest on that money will not be taxed until you spend it on consumption.
Are you happy with the present system?
To me it is very inefficient and does not make economic sense. The only loosers under the NRST as I see it are those in the accounting or legal tax field and the IRS.....
Let me guess your service business will be one of a few negatively impacted by the NRST?
http://www.salestax.org/library/cain_5-9-02.html
some excerpts
Consumer prices would decrease 20 to 30 percent by eliminating the nearly 250 billion dollars in annual compliance costs, and eliminating the taxes on corporate profits and labor (payroll taxes), which are imbedded in what we pay for goods and services. (Dr. Dale Jorgenson and other economists)
For example, Dr. Dale Jorgenson of Harvard University conducted a research analysis (1997), which showed that a national sales tax would produce a 10.5% increase in Gross Domestic Product, a 76% increase in real investments, and a 26% increase in exports in the first year of a national sales tax enactment. Those increases would level off at 5%, 15%, and 13% respectively over the succeeding twenty-five years. Nothing promotes the competitiveness of US businesses more than growth in our national economy, more dollars to grow our businesses, and a level playing field for selling our products and services to other nations.
Compliance costs would, therefore, fall under The FairTax. Today, according to the Tax Foundation, we spend about $250 billion each year filling out forms, hiring tax lawyers, accountants, benefits consultants, collecting information needed only for tax purposes and the like. These unnecessary costs amount to about $850 for every man, woman and child in America. To the extent these costs are incurred by businesses, they must be recovered and consequently are embedded in the cost of everything we buy. The money we spend on unnecessary compliance costs is money we might as well burn for all of the good it does us. The Tax Foundation has estimated that compliance costs would drop by about 90 percent under a national sales tax.