Listening a lot to Neal Boortz as he talks of his Fair Tax idea, I've noticed a common question that skeptics of the plan have. It seems that most people don't understand "embedded cost".
What that term means is the cost added to something because of business taxes. When Colgate makes toothpaste they have to pay all sorts of taxes before the tube makes it to a grocery store shelf. So when the tube gets to the store shelf Colgate has to increase the cost of the toothpaste to make up for the money they lost paying taxes. The average embedded cost of any product we buy today (anything from a Big Mac to a new car) is somewhere between 23 to 27%. The Fair Tax will eliminate that embedded cost and replace it with a 23% sales tax which keeps the average retail price of anything unchanged. Things will however be less expensive to everyone because everyone will keep 100% of their paycheck! And you thought Fair Tax was an oxymoron!