I was talking about it with a colleague the other day, and it reminded me that I meant to post this letter, which I got after suggesting that the Fair Tax would hurt the middle class.

What you don’t see is that the income tax raises the price of everything. Every item you buy is overpriced because the seller has to be able to pay the income tax on his payment. So it’s unfair to say that when the Fair Tax is introduced, prices won’t go up 23 or 30 percent. They won’t go up at all. The middle class will be better off.

I’ve encountered this argument before. The notion is that getting rid of income taxes will cause prices to drop to offset the impact of the new sales tax. My question in response: If this theory of how the economy works is valid, then shouldn’t wages drop 23 percent, too?