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On another board our founder wrote:

The Fair Tax is an inclusive tax. If the sticker says $1,000 for a NEW item - that is the price. $230 of the $1,000 will be forwarded to the Federal Government as a consumption tax.

I assume from this that Fair Tax is quoting a rate of 23%. In your example, you're paying $770 for the merchandise and $230 of tax. 230/770 gives us a tax rate of 29.87%, not the 23% they quote. For a 23% tax plus the seller's take to equal $1,000 you'd be paying $813 (1,000/1.23) for the merchandise itself.

Perhaps they assume that the seller will drop his price on that $1,000 item $187 because he no longer has to pay income (and payroll?) tax. That would mean that he's currently paying an 18.7% of gross sales effective tax rate, and I'd like to see some documentation of that assumption.

Phil
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