Under the Fair Tax, the employer pays you $50,000 a year, but instead of sending part of it to the government, he pays it all to you.
So from where does the cost savings come that allows the business to reduce his prices by the amount of the tax?
The 23% is currently embedded in the price of goods. It represents the tax that businesses essentially collect, and then pass on to the consumer in the form of higher prices. Once businesses are no longer charged this tax, then it is removed from the cost of the good. Therefore, the retail price charged and received by the business for each product reduces by 23%. However, the 23% is added back at the register through a sales tax. Therefore 23% -23% = 0. The price stays the same. The tax is just now collected in a different way, while eliminating the IRS.