The question goes something like this: You Make $100,000 and pay $20,000 in income taxes. Under the FAIRTAX will you take home $100,000 or $80,000? The implication is that it only works if we take home the $80,000. It also implies that $80,000 is then somehow less under the FAIRTAX than under the current income tax system.
This is what I have found.
The second book "FAIRTAX: THE TRUTH" covers this on pages 74-78. You as an employee are providing an employer your services for X amount of dollars, which is part of the employers "cost". Part of your dollars earned are needed by you to pay your expenses, of which are Income taxes, and payroll taxes. Under the FAIRTAX, your Federal Income and Payroll taxes disappear. Thus YOUR expenses will decrease by an equal amount as your income taxes. The question then is 1) to pass your savings on to your employer, or 2) to take the "windfall" and increase your takehome pay. And how will this affect prices.
In order for your employer to lower his prices, he must lower his costs, part of which is your payroll. If you lower the price you charge your employer by an amount = to your former income tax burden, his costs will go down allowing him to lower his prices. The more of the former taxes that you keep, the less your employer's costs will decline, and the less he will be able to lower his prices.
NOTE: By lowering your price an amount = to the taxes you WERE paying, you will still have the same amount of spendable money as before!!! PLUS, you will now receive a PREBATE check each month from the Govt. for the taxes you pay for necessities.
Under the FairTax, you would start out with no less than the same, plus the Prebate. Prices stay the same. Incomes remain the same. But the benefits of the FairTax are now unleashed.
The FAIRTAX is not a tax cut.
The FAIRTAX is revenue neutral.
- same amount of taxes are collected
- same amount of money is spendable by you, plus a little more from the prebate
- no new money for anyone, except for raises as a result of efficiency and economic growth (both byproducts of the FAIRTAX).
Under the FAIRTAX, we will take home the same amount of money, and we will also receive a prebate check each month. And as the economy grows, financial benefits in the form of higher wages, and more jobs will follow. Am I wrong?