Posted on 08/22/2005 6:53:28 PM PDT by RobFromGa
If the market can bear $1.23, then that's all it can bear. If the vendor is still getting $1.23, then you are not adding the 23% tax, which will make the price $1.61. So this vendor, whose cost has been reduced by 23% is trying to get $1.61 for a loaf of bread, when everyone else is lowering the price and selling more loaves, which results in a higher total profit. Competition will make the price go down.
If the market can bear $1.23, then that's all it can bear. If the vendor is still getting $1.23, then you are not adding the 23% tax, which will make the price $1.61. So this vendor, whose cost has been reduced by 23% is trying to get $1.61 for a loaf of bread, when everyone else is lowering the price so that the total price including the tax is about $1.23, and selling more loaves, which results in a higher total profit. Competition will make the price go down.
The Biggest lie about the fair tax is that everyone gets to keep 100% of their current paycheck AND prices still fall 22% because of 'embedded taxes'. The argument quotes a 1997 study done by then Harvard Professor Dr. Dale Jorgenson. Boortz tells us:
"Harvard economists have estimated this embedded tax to be around 22 percent of the cost of those goods. That 22 percent represents the payroll taxes and corporate business and income taxes paid by every manufacturer, shipper, wholesaler, merchandiser and retailer having any connection whatsoever with the product you have purchased. These taxes are all added to the cost of consumer goods."
According to Neal the 22% embedded taxes does not include the $1.3 Trillion of taxes paid by employees through income taxes and FICA. However, the Harvard economist who did the study says otherwise. In testimony the House of Representatives (see page 105 on link http://www.access.gpo.gov/congress/house/pdf/104hrg/26312.pdf), Dr. Jorgenson says:
"Since producers would no longer pay taxes on profits or other forms of income from capital and workers would no longer pay income taxes on wages, prices received by producers, shown in the fifth chart, would fall by an average of twenty percent."
There is no evidence to support this claim. Why would wages have to decrease after taxes on businesses, that are passed on to consumers ANYWAY are eliminated. What justification would also require wages to decrease?
There is no evidence to support this claim. Why would wages have to decrease after taxes on businesses, that are passed on to consumers ANYWAY are eliminated? What justification would also require wages to decrease?
Exactly.
Because the taxes currently in the wages are also passed on to the consumer. If these taxes go in the pocket of the employee, the added sales tax will increase the price of goods. Employees will have more money to spend, but prices for everything goes up. The only way to keep prices level would be for employees to take a pay cut in the amount of federal taxes they currently pay. There is no free ride simply by shuffling how taxes get paid.
In 2001 (for which a goodly amount of numbers are available), taking only major industries (Form 1120) from the IRS SOI Tax Stats it seems that almost a million businesses had $595.4 Billion subject to tax and actually paid $204.8 Billion. This appears to me to be a tax rate of about 34.4% and nothing like the low percentage numbers you're been hyping for tax rates.
'Course the IRS is probably wrong, right?
In addition, there are many more S-corps, partnerships, and individual proprieterships and they pay taxes as well possibly even in a higher tax bracket but surely not dramatically lower.
Perhaps you have some better source thatn the IRS SOI?
$595 Billion of taxable profit probably represents more than $4 Trillion of Gross Revenues. Since the fair tax is taxing gross sales, looking at a percent of tax of the profits is not valid.
You've been making this claim regularly with no demonstration of its veracity. Show us where Dr. J. makes the inclusion of employeee taxes that you claim he did. And don't bother to post that ridiculous conditional statement that Nightie and others have been posting hoping to fool some people. That shows nothing of the sort.
Let's see your unequivocal demonstration where he did as you claim. Counting the employees taxes as you claim is nonsense.
Your post reads like a regurgitation of the book which includes the mis-representation that employees will increase their purchasing power by 25+% overnight with the FairTax.
The FairTax base is consumption, not income. Your numbers are a bad set of mix and match foolishness - and untrue to boot.
You are mixing income tax bases and consumption tax bases - and the two are quite different and cannot be manipulated like that.
"Since producers would no longer pay taxes on profits or other forms of income from capital and workers would no longer pay income taxes on wages, prices received by producers, shown in the fifth chart, would fall by an average of twenty percent."
This clearly shows when Jorgenson was talking about the 20% prices would fall due to embedded taxes, he absolutely included employee paid taxes. Of course the fair tax organization owns Jorgenson's study and could produce it anytime they want to. But of course they do no want to.
Just read this thread from start to end, it is all spelled out in black and white-- both sides.
If Dr. J's study is not available anywhere on the net, hopw is it you claim to know so much about it and how he does things???
Seems a BIT inconsistent.
Dear groanup,
" You're still talking about SS here. That is not the discussion. My question to you was: what about tax policy? What is yours?"
I told you, groanup. If you don't like my answer, that's fine. It doesn't change my answer, which is, until you start to resolve the problem of the size of the federal government, you're addressing the wrong question.
If what you're saying that it isn't politically feasible to do the right thing, that doesn't mean we should go off and do the wrong thing. I don't believe that the transition to an NSRT would do less than badly harm the economy, possibly permanently, as long as the government is trying to collect 20% of GDP that way. I also don't believe that collecting 20% of GDP in that way would be anything less than very harmful to the economy, even on a steady-state basis.
"A couple of hundred years ago an entire nation was in upheaval. That nation adopted a set of laws that put all of the power in the hands of the people who dwelled in that nation. That had never been done before. Can you imagine the havoc and mania that should have occurred?"
Actually, the period between the beginning of the Revolution through some time after the adoption of the Constitution saw plenty of havoc and danger and difficulty, plenty of disruption and upheaval, death and destruction, and loss of fortune.
"Well, it worked."
Yup. It worked. Not without great cost. Nonetheless, it worked, and it's still working. Even economically.
While most of the rest of the world struggles, we seem to keep chugging along.
That's a key difference between now and 200 years ago. Two hundred years ago, things really WERE broken.
Today, there are things that could work better, but our economic system is far from broken. It is still the envy of the world.
From my perspective, you want to implement a proposal that I believe actually will break it. You don't see it that way, of course. If you did, you would oppose it, because you're a loyal, patriotic American, at least, from what I can see.
But so am I. And my perspective, that comes from my own experiences, experiences of a business owner of 20 years, experiences of someone with some formal knowledge in the matters at hand, experiences of an experienced, long-term investor, experiences of someone who has seen ideas come and go all my life, experience that tells me that 1. much of what is being promoted here is just fiction; 2. what is actually true and good about an NSRT isn't enough to put at risk an economic system that mostly works, and works better than mostly anywhere in the world.
I've tried to hammer at the fictions presented here in these threads. Seventeen percent embedded corporate income taxes. * chuckle * A small business owner's personal income taxes are now his business taxes. LOL!
That these and other proven fictions are bandied about by the proponents of the NSRT, and appear to be little questioned by any of you does not inspire confidence in me that your judgment is superior to mine.
I see neither the crisis that you see, nor do I see in the NSRT the solution to the problems we actually do have.
sitetest
"If you are really trying to be helpful, give me a link to a specific article"
http://www.google.com/search?hl=en&q=75+economists+fair+tax&btnG=Google+Search
Please, knock yourself out.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.