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Originally Posted by alansmithee
I don't see how income would rise. On the fairtax.org site, they were stating that prices would most likely remain neutral. This being the case, why would businesses bother to raise wages? Many large companies are currently opperating with excessive capital, and to my knowledge not one of them has decided to increase the workers' wages. Microsoft is one I can think of who have had excess cash for awhile. Instead of raising pay, they gave it back to shareholders in the form of dividends. They also have put forth a plan to buy back approx. 3 billion shares of stock in the next 3 years in an effort to raise the value of their stock. Remember, corporate decisions are based upon whats good for the shareholder, not the employees. Most businesses would likely consider the lower taxes on wages offset by lowering the price of their product (so that when the NCT kicked in the point of sale price is the same) to be enough of a benefit for consumers/employees.
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Income would rise immediately because the money previously being withheld would be returned to the taxpayer in each and every paycheck. I am guessing that the average increase would be around 20%--but I have nothing factual to back it up, it is merely an educated guess.
In terms of an increase in salary after the initial bump, I theorize (note the word) that it would. There is no concrete evidence to support this, it is merely a belief.
I believe this because I think it would be demanded, if the workers were educated enough to understand what is going on and demand the increase. I don't think that it would happen automatically.
Prices vs. income. Once again, I think the market would cause a decrease in prices. All it takes is one company to lower their prices a smidgen and the rest would follow or lose business/revenue to the first company. Any company with a brain would realize this potential for increased revenue without a corresponding decrease in profit. The first ones to do this would be the short-run winners (i.e. following the kinked demand curve).
But as I mentioned before, most information and ideas presented here are theoritical. Since it has never been done here, there is no evidence to say 100% one way or another. All I know for a fact is that the current system is failing miserably. We can be pre-emptive and fix it early, or wait for it to get worse (which it does every year).