http://www.fairtax.org/site/PageServer?pagename=about_faq
#17
How does the FairTax affect wages and prices?
Americans who produce goods and earn wages must pay significant tax and compliance costs under the current federal income tax. These taxes and costs both reduce after-tax wages and profits and are then passed on to the consumers of those goods and services in the form of price increases. When the FairTax removes income, capital gains, payroll and estate and gift taxes, the pre-FairTax prices of these goods and services will fall. The removal of these hidden taxes may also allow wages to rise. Exactly how much prices will fall and wages will rise depends on market forces. For example, in a profession with many jobs and too few to fill them, wages will likely increase more than in fields where there are too many employees and not enough jobs.
Only those tax savings realized by the producers and retailers. If those savings are realized by the workers, they can't go towards decreasing prices. That is why unless workers agree to take wage reductions in the amount of their tax, price must go up. There is no way around it.
I think the FairTax is going to be passed in the next few years but some people such as this poster are never going to be convinced because they rely on the Income tax.
A large percentage of IRS employees are also going to be impacted by the FairTax. I think it will be close to 70% of IRS civil servants that will be reduced in force. Government unions are going to fight the FairTax passage.
In the end though as people gather an awareness, the FairTax is going to pass through Congress. The demographic trends tell me it will be in a few years, as early as 2010.
I have asked this question before and not gotten an answer - how do estate and gift taxes effect the cost of new goods and services?