Prices already include the costs of our income tax system. THose costs (depending on who you ask) come to about 22% of prices - alternatively our income tax system adds 28.2% to prices.
After passing the nrst, unnecessary costs are eliminated due to the drive to maximize profits. So then prices are appx 22% less...then add the nrst and prices are back to where they are today.
Purchasing power remains constant. Even the anti-reformers (the ones who know anything) will tell you that purchasing power will remain constant.
So today, prices are inflated by about 28% tdue to the tax system and its costs. Under the nrst, appx the same inflation occurs. Nobody will be worse off due to price changes or saved money. There will be a windfall for folks who have placed $ in tax deferred accts though.
Kick around here for a bit. Consider the source when evaluating.. but it's a good starting point for investigation.
I also pinged Conservative Goddess who is well informed to help with information on this....
Thank You Principled.
I've not followed this thread...but I assume from your post that there are questions with respect to the estimated reduction in prices. While I doubt that prices will drop the full amount of the tax, I am confident that return on investment and wages will rise so that purchasing power remains constant.
The revenue neutrality of the FT assures that the government takes no more from the economy that it currently takes....therefore the purchasing power of the American people as a whole is unchanged. The question then becomes, who will be better off and who will be worse off??? Those currently living from tax free sources, like tax-free muni-bonds, illegal income will see a reduction in their purchasing power....but those living at or below the poverty level will see an increase. Middle income folks will probably remain about the same.
As capital flows into the American economy, all will benefit from increased economic opportunity. Currently, the US has the highest Corporate Net Income Tax in the OECD. This is suffocating our economy. Please see: http://www.taxfoundation.org/publications/show/1175.html
When you consider this fact in commbination with the WTO ruling which says we can't border adjust our prices to remove the tax component (They call that an illegal export subsidy), but the VAT of Europe is fully border adjustable......it's a miracle that we have any jobs left in this country. That is testament to the productivity of the American worker.
The FairTax will completely remove this obstacle to American prosperity....and remove this tool of manipulation from the WTO. This border adjustability argument has been going on for about 30 years and is responsible for a great deal of machination....machination that keeps tax attorneys fully employed and kept Congress busy writing the American Jobs Creation Act of 2004 to vitiate the demands of the WTO. Please see: http://waysandmeans.house.gov/Media/pdf/hr4520/hr4520summary.pdf
All the talk about prices and wages really just muddies the water and distracts from the fundamental economics which should be driving the discussion: A revenue neutral tax that IS border adjustable will propel this economy into orbit and bring jobs back to our shores....that's the untold story.