[Vinnie]

Remember the 'sugar crisis' circa 1970?
The price of sugar doubled and more.
Soft drink mfgs. raised the price of their drinks, along with diet drinks that use artificial sweeteners.
When the price of sugar came back down soft drink prices didn't.

Same will happen if mfgrs. get a windfall of no tax on their raw material.
They'll keep it.

Another point..
Lets say I have $1mil in the bank. I've paid taxes, income and capital gains on it.
We switch to the fair tax.
Anything I buy with that money will be taxed 20%+.
I am paying taxes twice on that money.

[RockinRight]

I am generally a supporter of the Fair Tax, but this is one major flaw.

[sitetest]

Dear Vinnie,

"Lets say I have $1mil in the bank. I've paid taxes, income and capital gains on it.
We switch to the fair tax.
Anything I buy with that money will be taxed 20%+."

You know, I hadn't quite looked at it in this way before, but in a sense, this is a one-time devaluation of American monetary assets by about a fifth or a quarter.

Most current income doesn't lose its value, because current income won't be taxed. But accumulated monetary wealth, cash, or cash instruments like certificates of deposit, bonds, etc., take a one-time hit.

I suspect that all financial assets ultimately take a big hit, because unless the stock market goes up by 20% - 30% just on the enactment of the NSRT, the value of equities is similarly devalued.

The income stream from financial assets isn't hit as hard, because at least the 15% tax on dividends and capital gains goes away. But I don't think that will quite make up for the increase in prices from the sales tax, itself.

However, should someone decide to spend the actual accumulated asset, itself, should someone decide to sell the bond or the stock, and spend the actual capital on a major purchase, well, they're screwed.

Oh well, it's a bit like Robin Hood, steal from the rich, give to the poor, I guess.


sitetest