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To: xcamel
Just wait until you start getting hammered with "effective rate" calculations

Yeah, it's so much easier to get people to buy your BS when you get them focused, as the author tries to do, on marginal rates rather than effective rates.

But thanks for pointing out another area where the author does his own misrepresentation. How many times does he go back to some variation on how everything will cost 30% more? He's trying to scare people with a marginal rate "sticker shock" rather than dealing with what the actual effect is.

Look, I can blow apart his "everything will cost dramatically more" thesis even with dealing only in marginal rates.

Example:

Today's item costs Joe Smith $100. We will accept Rob's thesis that prices will drop by 8% with the removal of corporate taxes and employer-side payroll taxes.

Base item price: $92
NRST (29.87% exclusive): $27.48
Total Price: $119.48

So, you're thinking, "see, the price went up by $19.48!" Not so fast, bucko. You see, Joe's current effective federal tax rate (income + payroll taxes) is 15%. That means he had to earn $117.65 to pay for that $100 item in the first place. Under the NRST, he has that entire $117.65 in his pocket.

So, that's a price increase in effective dollars of $1.83, or 1.83%. Given the rather vague nature of the assumptions, this is practically statistical noise, and quite consistent with the prediciton I've always made that effective prices will remain the same, plus or minus five percent.

And that's comparing the income/payroll tax's effective rate to the NRST marginal rate. When you actually figure in the NRST effective rate, even under Rob's numbers, "Joe" is paying less for that item in the post-NRST world than he was in the pre-NRST world.
32 posted on 10/10/2006 10:25:05 AM PDT by kevkrom (War is not about proportionality. Knitting is about proportionality. War is about winning.)
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To: xcamel
BTW, the example in #32 assumes the bill's current 23% inclusive / 29.87% exclsuive NRST rate. if, however, the Bush tax cuts were made permanent, the revenue-neutral rate drops to (I beleive) 19.2% inclusive / 23.76% exclusive.

That makes the "net" price change for "Joe" $3.79 (3.79%) less than the current price. Again, still within the +/- 5% prediction.

39 posted on 10/10/2006 11:03:01 AM PDT by kevkrom (War is not about proportionality. Knitting is about proportionality. War is about winning.)
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To: kevkrom
The problem with such anecdotal, single situation analysis, is that it does not apply to the breadth of individual circumstances. While "Joe" might indeed be a wage-earner with a 15% effective tax rate, "Sally" might be a retired widow having the same take-home income as Joe, but with a 2% effective income tax rate. To Sally, (and to Joe, for that matter,) the price of the formerly $100 item would indeed rise $19.48 (19.48%) BUT, Sally only earned $102 to by the $100 item and only has $102 to spend on the $119.48 item. To her, "effective" prices rose 17% ...

... that's a "fer peice" from your prediction of "+/- 5%".

PRICES will indeed rise (much more than your 5% prediction. DISPOSABLE INCOME might or might NOT rise depending on who you are. AGGREGATE PURCHASING POWER will remain initially unchanged (for a revenue neutral program) BUT ...

... INDIVIDUAL purchasing power WILL VARY SUBSTANTIALLY.

42 posted on 10/10/2006 11:23:54 AM PDT by Dimples
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To: kevkrom
So, you're thinking, "see, the price went up by $19.48!" Not so fast, bucko. You see, Joe's current effective federal tax rate (income + payroll taxes) is 15%. That means he had to earn $117.65 to pay for that $100 item in the first place. Under the NRST, he has that entire $117.65 in his pocket.

If the employer is going to hand Joe the whole $117.95, then that implies that Joe's gross annual income remains the same as before. All the taxes passed to the government on Joe's behalf are in his paycheck. The employer has no net savings in his labor costs (wages and salaries) except the cost of tax compliance. The employer can't reduce his prices as he must maintain the same revenue to pay Joe at the agreed rate. The asking price for the product doesn't change, but the taxation becomes the NRST + state sales tax + local sales tax.

It's a pipedream to think employers will cut employee pay and apply that cut to the price of their products. Their employees would leave for an employer who doesn't abuse them in that fashion. It would destroy the buying power of an employee to purchase products from employers who chose not to cut prices and employee pay. The government can not mandate how the employer decides to handle that payroll issue.

To achieve the revenue neutral aim, Joe must consume enough to transfer all of the previously witheld income and payroll taxes to the government. If Joe becomes frugal, the government has to raise the rate to restore the tax revenues to the desired level. Joe becomes even more frugal as the increased NRST rate drains more buying power.

55 posted on 10/10/2006 1:18:40 PM PDT by Myrddin
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To: kevkrom
And that's comparing the income/payroll tax's effective rate to the NRST marginal rate. When you actually figure in the NRST effective rate, even under Rob's numbers, "Joe" is paying less for that item in the post-NRST world than he was in the pre-NRST world.
Joe does not live by bread alone.

Paying an additional 30% on government services as well as

30% ON all government employee's (local, state and federal) wages salaries and benefits as well as 30% tax on their purchases(local and state taxes would have to be increased for the NEW federal tax they'd pay).

30% tax on interest (paid or earned),

30% more for anything imported (how many products do you buy that aren't?),

30% tax on fees, exises and other taxes included in a "gross payment" tax,

30% more for rent, gasoline, utilities, car repairs, insurance (Insurance coverage would have to increase 30% to cover the new tax then another 30% on that for the insurance "service" fee (premium)...

That's to name only a few that would NOT be an increase in purchasing power nor do they improve any marginal or effective tax rates.

69 posted on 10/11/2006 8:12:12 AM PDT by lewislynn (Fairtax = lies, hope, wishful thinking, conjecture and lack of logic.)
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To: kevkrom
Under the NRST, he has that entire $117.65 in his pocket.

That is an assumption, not a fact. We don't know how much he will have in his pocket because we don't know how the tax savings will be divvied up in the real world.

88 posted on 10/12/2006 8:57:41 AM PDT by lucysmom
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