As a strong supporter of the FairTax, I read your article on the subject with some interest. As you might expect, there are a number of points made in the article that I take exception to. I will address as many as time permits.
1. You make the point that the price declines in consumer products will be the result of savings in reducing workers' salaries. That isn't the case at all. Having been involved in debating this issue for some time, I can tell you that the debate that relates to the employer paid portion of payroll taxes has always been over whether those savings to the employer would be passed along to employees (in the form of higher gross wages) or to customers (in the form of lower prices). With respect to employee-paid payroll taxes, I haven't heard anyone suggest that businesses could get away with lowering gross salaries to essentially highjack these savings from their employees. That concern assumes a labor force that is at the mercy of employers, which is not the case in a free market economy.
The savings are primarily the result of the elimination of corporate income taxes and their associated enormous compliance costs, multiplied several times over because of the cascading effect that occurs in our system when products move up through the supply chain. I have been involved in developing spreadsheets which indicate that, for products which go to about 5 levels deep in the supply chain, the 20 - 30% range that AFFT uses is quite reasonable. Of course, many products in our system go well beyond 5 levels in the supply chain.
2.You also make the point that the administrative burden of complying with a national sales tax would be comparable to what businesses have now, since they would be collecting the NRST. In my experience, that isn't an apples to apples comparison. As a CPA who has been involved with the financial and accounting management of a number of emerging technology businesses (and some that never emerged ... LOL), I can tell you that sales tax audits and administration are trivial compared to corporate income taxes, which are less burdensome than payroll taxes. As an example, are you aware that one of the biggest growth industries in the country over the past couple of decades has been payroll processing? ADP and Ceridian have built huge, profitable organizations on that service. In addition, there are many smaller companes doing the same thing for other small companies. There is no way that ADP and Ceridian will be able to replace their lost revenues from payroll processing by convincing retailers to outsource their sales tax administration under the new system.
Even sales tax administration, taken as a whole, will likely be less burdensome than it is now. That probably surprises you. The reason is that the biggest problem that we have now in sales taxes is the lack of uniformity from state to state. Whie the federal government cannot and should not mandate how the states collect their revenues, the FairTax has financial incentives built in which we believe will accelerate the trend (already going on) toward uniformity or "harmonization". If we end up with a sales tax system that is far more consistent state to state than what we have now, those administrative savings will more than make up for adding another line on sales tax returns for the national sales tax.
Therefore, if we completely eliminate corporate income taxes, as well as payroll taxes, and substantially simplify sales tax administration, it would appear to me that compliance costs should go down enormously - which is what the people at AFFT are predicting.
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