I still however believe that a 29.870129% sales tax will lead to more evasion especially in the service sector.
I suspect you would have a hard time establishing that seeing as the dominant portion of the tax evasion today is in that same service sector among small business & self-employed types.
The studies I have seen at even high rates of taxation in the EU, the dominant reason for small buisinesses and single-propriators dropping out into black market operations and cash economy is more a function of complexity of the tax system acting as a barrier to entry and plain disgust with it more than rate of tax levied. Among countries with the same sale tax rates in the 15-20% range there is a wide variation in evasion rates directly related to the amount of regulatory burden imposed with the business tax system/s in existence.
I am very confident your numbers can only work if employees take a pay cut.
Which numbers, the tax rate calculations or figuring the lower producer pricing in a taxfree manufacturing environment.
AR writes:
"I am very confident your numbers can only work if employees take a pay cut."
I don't see why a pay cut would be necessary, but just for a moment, let's assume the worst case scenario. Let's throw out all we know about economics and also ignore all the facts, evidence and experience, and pretend that competition and informed consumer demand doesn't exist.
Let's even say that prices after the imbedded costs are gone, but manufacturers, distributers, and retailers refuse to lower their price.
If I make a grand a week, but really only get $700 take home with the current system, and for simplicity's sake, I now take home the full $1000 (a 42.86% increase in available cash PLUS I get the rebate, am I not still better off with the FairTax?
Now, to make the scenario even darker, throw in a pay cut.
How much of a cut do I have to take to actually become worse off than I am under the current system? Will it vary along the pay range?
I don't believe that all of these possibilities would all occur at once, if they happen at all, but even in the furthest extreme, it'll be hard to be worse off with the FT than we are now under the IT.
Am I wrong? What if anything am I missing?