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Originally Posted by AVoiceOfReason
3. It will drive up prices is a fallacy. Yes, there will be a 23% tax on goods sold at the retail level, but there already IS an embedded tax on everything we buy in the store anyway. Take chicken soup, for example. The grower of the bird is taxed on his income when the bird is sold. The maker of the can and label is taxed. The soup maker is taxed when it is sold to the supermarket, and the supermarket is taxed as income when the can is sold. All those taxes along the chain drive up the cost of the goods by about the same 23% we'd be paying under a national sales tax. Remove the taxes from every step in the production chain and the prices go down at the retail level.
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You're kidding, right? Please tell me you don't really believe that.
Let's make it simple. The govt gets X dollars in taxes each year. Y comes from people directly through income, estate, etc. and Z is the hidden taxes. The price you pay for goods is equal to the cost (A) plus the 'hidden taxes' (Z).
The fair tax isn't some magical system whereby the people pay a sales tax and suddenly the hidden taxes aren't needed anymore. They aren't getting it from business, so it falls to the people. Therefore, even though the prices look lower, they still cost you just as much.
Of course that also assumes that when business costs fall by the amount Z that they pass ALL of that savings over to their customers and do nothing to hook up their investors. In reality they will take a portion of Z and add it to A to make them happier. Good news, now the people pay more taxes (unless you are one of the few that don't live paycheck to paycheck) and the cost savings are partially offset by increased investor income.
Great system. Only the truly dense can love the fair tax.