Will The FAIRtax Make
Prices Rise 23%? No!
Prices Rise 23%? No!
Sometimes it’s a good idea to give Grassroots Members coaching points on how to answer questions. We will give one here.
When your audience hears The FAIRtax rate is 23% tax-inclusive, the understandable reaction will be one of alarm, thinking prices will rise 23%. We’ve chosen to handle the topic a little differently from the way many of you probably learned in the first Boortz book.
Prices will actually not rise 23% under The FAIRtax - in most cases [assuming no “accommodation” (i.e., money printing) by the Fed, according to Economist David Tuerck.]. And if prices do rise some, your purchasing power will rise more.
The FAIRtax eliminates income-taxes, payroll-taxes and tax compliance costs. These costs must now be passed along to the consumer in the price of every good and service you buy so the sellers all along the line of production can cover all of their costs and make a profit. The increase in price for each good or service because of these embedded costs isn't possible to calculate precisely, but we know for sure they increase the final price.
We don’t know exactly how all markets will respond when these embedded taxes and costs go away under The FAIRtax. But in any competitive industry where suppliers vie for market share, pre-tax prices will drop. In 1995 when Congress didn’t renew an airline ticket tax, airline ticket prices quickly dropped by the amount of the tax. When Congress restored the tax, airline ticket prices rose again by the same amount.
One economist believes embedded taxes and compliance costs could average as much as 12.5% of today’s prices. These embedded taxes and costs would go away under The FAIRtax. Some prices will reduce more and some will reduce less. Others believe the average costs will reduce even more than 12.5%. However, if 12.5% is accurate, and if today’s pre-tax prices drop by 12.5%, a one-time price rise with The FAIRtax of nearly 14% over today’s prices would occur (based on a tax-exclusive markup for The FAIRtax from a pre-tax base price of 87½% of today’s prices).
But if you are employed, you would no longer pay the 7.65% payroll tax (and neither will your employer). And if your effective tax rate today on your taxable income is 12%, you would no longer pay this tax either. Your available spending would rise over 24% with The FAIRtax (because the 19.65% in income and payroll tax rates are discounts, not markups), putting your purchasing power over 12% ahead of where you are today.
For those of you on Social Security, there is good news for you, too. The FAIRtax adjusts Social Security benefits upward to compensate for any increase in the cost of living because of The FAIRtax. And your income, assuming an effective rate of 12%, should rise just about 14% to match price increases.
Not all of your cash outflow is taxable under The FAIRtax. Consider taxes, charitable contributions, loan repayments, tuition, used goods, deposits to savings, and investments.
Don't overlook the Prebate because the Prebate also helps households whose members are lawfully residents in The United States.
The FAIRtax Re-Empowers you once again to decide for yourself when and how much taxes you pay.
I have prepared a condensed version of this response about 1/2 as long. Let me know if you want it. Does anyone else have an idea of how better to explain markets’ response to removal of embedded tax costs and tax compliance costs?
And don’t forget to order your FAIRtax gear from The FAIRtax Logo Store
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When others see your activity, they are inspired, and the process snowballs. When the process snowballs, Representatives, Senators and, yes, even the President start to take notice and listen to Us.
Yours In Liberty!
AFFT Grassroots Coordinator & Secretary