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Dear woodbeez,

"No he doesn't because he IS NOT paying personal income and payroll taxes on his business. He makes $50,000 not $41,000. There will be NO income tax or payroll tax."

Good! Then Bob's in good shape, here.

But that means that under the current system, he's paying no corporate income taxes. And that means, his business won't be getting them back, because he's not paying them in the first place. And that means that for Bob's business, prices can't be lowered from the corporate income taxes he is no longer paying. Because he wasn't paying them in the first place.

If you do a little spreadsheet showing cascaded taxes, when you get to Bob's level, the amount of taxation he adds to the final product that would be removed by the NSRT is 0%.

sitetest

This is a bit confusing for me; I am a sole-proprieter small business owner, and taxes are my bane. However, I do not see this change helping me at all. Presently, all of my income is reported as Schedule C profit/loss, and I pay with a normal 1040. Compliance on the Fair Tax will mean I need to CHARGE that tax above and beyond my normal retail charge - dropping it by 25% is not feasible, since my overhead does not CHANGE under a FairTax plan, and, in fact, increases since I am now paying the additional fees in the creation of my product.

I do not buy the idea that prices will fall, either. The price will be what the market will bear, and getting a 400.00 check each month to simply offset food / clothing / gasoline / necessity purchases is a drop in the bucket. And, in truth, the IRS does not go away, since it will now be involved in making sure that tax collection is complied with; more hassle and expense for me.

Frankly, the unfortunate part of the whole FairTax exercise is that I do not trust the government to enact it without special deductions, etc. anyway - in the end, regardless of what party is in power, it will not be fair. I also agree with the argument that the little money I have saved to date 'after tax' would now be taxed at 23% (which my feeling is that this is a conservative number; at this number, it would be at least 33% here in TN with the sales tax we already have in place) if and when I spend it.

It is not perfect, but IMO the current system should be adjusted before some change this radical is brought into the equation. Get rid of the AMT, make the Bush cuts permanent, and simplify the code section by section so that it is more understandable.