The Fairtax plan will benefit the economy and the majority of Americans (a)

Thank you for the kind words, I am also pleased to debate someone equally knowledgeable about the FairTax, if not more so. I still plan to show that the tax-exclusive will not need to be much more than 30%, and that tax evasion will not be substantial enough to warrant the increase that you have proposed. Effect on Prices Prices will only rise by the tax-exclusive rate "if" the fed decides to accommodate. If the fed did not accommodate, the embedded tax argument would be perfectly valid, because there are indeed taxes embedded in the price of everything we currently buy. In fact, if the fed did not accommodate, and employers were to decrease gross pay down to current net pay, the base price of all goods should theoretically fall to a point such that the after-tax price is the same (or close) as what it currently is. If the fed did not accommodate, but employers left gross pay the same, prices would still fall a little bit because there are still corporate and payroll taxes eliminated that will drive costs down somewhat and therefore prices as well. You concede that used goods would rise in price to reflect the rise in price of new goods, so that there would still be sufficient demand for new goods. "How does this help the average person...?" Well, it seems that you have forgotten about the impact of the prebate. I already explained in my first post that the effective tax rate for a couple making $50k/year would be 13.6%, assuming that they spent every dollar on taxable consumption. Thus, if we consider the rise in price of used goods to be a tax, than this couple is still benefiting under the fairtax. If you have a problem with that claim, I will gladly show the calculations. Again, you ignore the effect of the prebate in suggesting that low-income wage-earners will be at such a severe disadvantage. Homeowners would see the price of their home increase, this is true...but if they sold their house with the intent of buying another house, they would not be at too much (if any) of an advantage compared to non-homeowners. The only people who would be at a disadvantage under the fairtax are those with only modest income but substantial savings made with after-tax dollars, retirees are the prime example, but also some in the middle class. However, this disadvantage is one time only. If implemented today, retirees 20 years from now will be much better off than they otherwise would be. This is because the fairtax greatly facilitates and encourages saving, so it will be much easier for the middle class (and everyone) to save money, both for their retirement and for advancing their economic status. You are correct that the expansion of the money supply would decrease the real value of U.S. Treasury bonds. However, many holders of U.S. Treasury bonds are foreigners, so their loss would be our (the U.S. government's) gain. In fact, China and Japan together have over 1 trillion dollars of treasury bonds, and there is a total of 2.3 trillion dollars held by all foreigners. http://www.treas.gov... I have explained that current retirees would be at a loss if the fairtax were implemented today, because as you say, the value of their savings would be greatly reduced. However, such a draw-back could be easily resolved by offering current retirees a one-time only rebate to account for the loss in their savings or a portion thereof. If the fairtax were given serious consideration, proposals like this one or something similar may be deemed necessary for the transition. (I admit this is not an official part of the Fairtax plan) As for the wealthy converting all of their assets to foreign currencies, the market would quickly reach a new equilibrium, so although what you say may be true to some extent, the resulting increase in investment from the fairtax would soon re-inject more money into our financial markets than was lost from the initial conversion. "The point being:" has already been addressed. The increase in prices would not hurt lower wage earners because of the prebate. Current retirees and low income earners with substantial savings would be at a disadvantage the first few years after implementation. However, this unfortunate side effect could be corrected as previously explained. In the long-run, everybody would benefit under the fairtax, even if it is true that the wealthy and financially sophisticated would benefit more. You than assert that the increased investment would flow to "high growth countries, such as China and India," but growth of GDP is expected to grow more quickly with the fairtax. In fact, Beacon Hill has predicted increases in every sector of the economy (GDP, domestic investment, capital stock, employment, and real wages), and only a modest decrease in consumption the first couple years after implementation. However, after the economy adjusts to the transition, consumption will ultimately increase as well beyond what it would be in absence of the fairtax. http://www.beaconhill.org... (see table 3, pg 22) Business Purchases Here I must apologize for my misunderstanding, you are correct that the fairtax exemption applies to all business expenses. However, in order for a business to make purchases tax free, they would have to be registered sellers and would therefore be expected to make quarterly tax payments to the fed. There are only 20 million registered sellers in the country now, and all of them would be subject to auditing. Thus, it would be very difficult to set up a fake business in order to make tax-free purchases. It appears that you made an error in your claim regarding Dr. jane Gravelle. While the link that you posted is unclear because it is a presentation and not very detailed, it appears that 8.4% is the non-compliance rate implicit in the NIPA statistics. However, accounting for this difference would result in a tax-inclusive rate of 26%, which is only 3% more than the rate presented by fairtax.org. (see the second chart on pg 3 of your link) Thank you again for continuing what should prove to be an excellent debate.