As I've said before, throwing the bomb of a consumption tax into a consumption based economy is practically uncharted territory. Given the gooberness of the guys who've been feebly researching but boisterously propagandizing this over the years, I can say that the utopian conclusions and mutual back scratching haven't helped the clarity.
That all being said, do you think that people will make their old toaster and towels do rather than spending more for a new set? Repair and recover furniture rather than buy new stuff? Engage in an orgy of new spending on household goods and other taxed items immediately before the tax comes into play, thereby keeping their budgets down for years to come? How about cars and new houses?
Do you really believe that retailers will drop their prices, or will they behave as always?
And, like we've tried to point out to you hundreds of times now, when you've got 30% more disposable income, does it really make a damn bit of difference if prices drop?
They must drop their prices. They have no choice. With the NRST ALL current imbedded taxes in the cost of a product are removed, making the production of the product cheaper, the cost to the retailer cheaper, and ultimately the cost to the consumer cheaper.
All it takes is 1 store to lower the price and all the rest must follow or die.
Durable goods, and those things that can be rebuilt or resold, will go up in value. Businesses not correcting for no longer having to fork out payola to their tax advisors and ponying up compliance costs, will be pushed out of markets by businesses that DO adjust their prices downward.
What are you? A tax lawyer? CPA? An IRS agent? Obviously someone whose ox is gonna get gored. Are you afraid you might have to go out and get a real job?
You mean that large lobby of small business owners who are the backbone of AFFT?
Welcome to FREE REPUBLIC...
Actually it's pretty well known, used, and understood. The U.S. has all sorts of consumption taxes. This may be a bigger one, but it is not a new idea.
If it weren't for your use of the word "gooberness" I might be tempted to think you were just misguided. However, you sound more like someone who is disengenuous. I could be wrong, though.
Shalom.
Go study the proposal. Then update your resume. Your days at IRS are numbered.
Not for you, but for others who are serious about learning about this proposal. . .
If retailer "A" maintains his price at the same level despite his costs being dramatically reduced, and retailer "B" lowers his, who do you think that the customer will buy from? Will not "A" have to drop his price to compete and stay in business?
If all the Chevy dealers decide to break the law and collude on price, Ford, Chrysler, and Toyota will sell more cars while Chevy entertains the illusion that they are making more money.
Please make your next false objection a little tougher. This is just too simple.
"That all being said, do you think that people will make their old toaster and towels do rather than spending more for a new set? Repair and recover furniture rather than buy new stuff? Engage in an orgy of new spending on household goods and other taxed items immediately before the tax comes into play, thereby keeping their budgets down for years to come? How about cars and new houses?"
The economic study of the FairTax did show that consumption would decline in the first year after implementation, but consumption growth would be higher from that point forward, owing to a faster growing economy. Consumption would catch up to where it would have been by the third or fourth year and be higher from that point forward. Even in the first year, the net decline in consumptuion would consist of a significant decrease in the consumption of imports, partially offset by an increase in the consumption of US produced goods.
Because of a huge decrease in compliance costs combined with the elimination of the disadvantage that our current tax system places on US production, GDP growth in that first year would be a smoking 10+%. It would decline each year but would level out at a fraction of a percent higher than under a continuation of the current system. By the time that happened, the economy would be 1/4 to 1/3 larger than it otherwise would have been.
"Do you really believe that retailers will drop their prices, or will they behave as always?"
Yes and yes. Price competition is alive and well in our economy and the evidence of that is abundant. Did Wal-Mart become a mega retailer by charging high prices? Economic theory holds that businesse exist to maximize profit, which is NOT synonymous with maximizing prices. Because of the elasticity of demand, demand moves inversely to prices.