Posted on 05/12/2005 7:46:54 PM PDT by Your Nightmare
Members of the President's Advisory Panel on Federal Tax Reform on May 11 expressed concerns over the FairTax national retail sales tax, a plan that has emerged as an alternative with a major grass-roots push.
Panel chair Connie Mack, vice chair John B. Breaux, and other members worried the plan would be difficult to enforce, would be regressive, and would require a high rate in order to take in enough money to fund the government.
Breaux raised concerns that the proposed 23 percent (tax-inclusive) rate would not be sufficient to raise the revenue necessary to fund the government. The Joint Committee on Taxation estimated that it would take as much as a 57 percent (tax-exclusive) rate to be revenue-neutral. Further, Breaux said he thought exemptions that would be carved out to make the sales tax progressive would also complicate it.
Mack, who raised concerns similar to his fellow panelists', said he was "intrigued" by the plan. "But if it's such a great idea, why haven't other political entities around the world pursued it?" he asked.
Americans for Fair Taxation Executive Director Tom Wright emphasized that the plan emerged after "thorough academic research" and "thorough polling" The strong grass-roots push has resulted in some of the group's 600,000 members appearing at each of the panel's hearings and has inspired a large comment-writing campaign to the panel in support of the plan.
Sales tax advocates were among the 20 witnesses who gathered before the panel for a full day of testimony on tax reform proposals. Although the group has held several other hearings in Washington and around the country, the May 11 meeting was its first hearing on specific reform plans since Bush appointed the panel in January. The panel has been charged with identifying tax reform proposals that are progressive, encourage charitable giving and home purchases, and are revenue-neutral. The proposals are due by July 31.
Among the tax replacement and reform plans presented to the panel were the value added tax, consumption-based tax, and the flat tax, as well as proposals that would use the current income tax as the foundation.
Witnesses generally claimed that theirs was the fairest, simplest, most flexible, most transparent revenue-neutral proposal that would improve economic growth and savings while meeting the president's criteria of encouraging charitable giving and home buying. Witnesses presenting consumption-based plans praised their overhaul as taking millions of low-income taxpayers off the rolls, being easy to transition to on a worldwide basis, and including safeguards to prevent new loopholes that would result in increased complexity down the road.
Tax reform panel members, who agree the current tax system needs to be fixed, grilled witnesses without revealing whether they will ultimately endorse a consumption- or income-based tax or a different mixture of the two.
You must have missed this one to you.
If the majority of taxes is in prices, then more than 50% of taxes are in prices. If more than 50% of taxes are in prices, then less than 50% is anywhere else and less than 50% is not a majority. Hence it is not the case that a majority of taxes is in two places.Uh, no. You just seem incapable of understanding. If 75% of taxes are in wages and wages are in prices, then 75% of taxes are in prices as well as wages. Get it?
Did you mistype?
Maybe it's time to start sending these jackass politicians Tea Bags instead of money. They raise taxes but won't raise a finger to CUT spending and CUT programs that are useless and unconstitutional.
tick tick tickDamn, can't a guy eat lunch?
Your post was ambiguous. You should learn to communicate more clearly.
Your post was ambiguous. You should learn to communicate more clearly.Grade-school math is ambiguous to you. You should learn to understand better.
Math wasn't the problem. It was language. Really. It was ambiguous. I asked for clarification. You would prefer that I not ask?
Water is dry. Red is yellow.
He thinks if he says something so preposterous enough, he's at least going to fool somebody. In the process, he looks quite foolish. Of course, he does have problems communicating clearly.
Can only make a short response now ... more later.
Obviously you DON'T understand tax cascading (as you say):
Here's an abstract about the concept from a paper by IMF economist H. H. Zee:
"Presents the concept of tax cascading, which refers to a situation whereby a commodity or service is taxed more than once under the same tax as it passes through various chains of production-distribution chain, for example from manufacturing to retail stage, a classic example being through multistage-general turnover tax. Dwells on why tax cascading is undesirable, its major determinants, and provides a synthetic pricing rule through which it can be estimated. Considers a cascading tax as universally undesirable, since by taxing transactions at stages prior to the stage of final consumption, it leads to more severe economic distortions than would a tax imposed only on final consumption, such as a retail sales tax or a full-fledged value-added tax extended to the retail stage. Determines the degree of cascading being dependent on demand and supply elasticities, whereby under most circumstances when neither the demand nor the supply of a commodity or service experiences an extreme elasticity, a partial forward shifting of the tax can be expected."
Since you don't have any notion of what is involved perhaps you should update your search engine instead of posting outdated cut and pastes that have been well-discusssed in past threads and bear little credence to the subject at hand.
You make it furiously apparent you DON'T understand tax cascading at all and that's surprising since most of the VAT countries went to a VAT in a (failed) attempt to eliminate tax cascading. That's really humorous in view of your narcissistic love for your Nightmare VAT (or Nightmare Flat, whichever it is today).
Certainly, you are QUITE misnamed!
You are talking about corporate taxes only. We were talking about all taxes. If personal income taxes were incident on consumers (as the FairTaxers imply) then nominal wages wouldn't be lower because of the PIT, they would be higher (to make up for the tax) - as would prices."Oy! Because the taxes in wages can also be in prices. That's the point, to get the embedded taxes out of prices you would also have to get them out of wages, ie. reduce wages."That is an absolutely incorrect statement. The total entity level tax burden is allocated to investors in the form of reduced return on investment, to employees in the form of REDUCED wages and benefits, and to consumers in the form of higher prices.
The ultimate incidence of entity level taxation is allocated by market forces, but in the process is neither expanded or reduced in GROSS TOTAL. They're like a water balloon with a fixed volume...you can change the shape of the balloon, but the total volume is constant.That was my point. You can't have "embedded taxes" that go beyond the total taxes the government collects. Pigdog was saying otherwise.
By definition, taxes which are incident on the employees are not part of the cost of a good.Correct, but for prices to drop due to the eliminate of a tax, that tax must be incident on the consumer. The only way for a direct tax on the employee (PIT) to be incident on the consumer is if wages are higher (the tax is in wages, but not incident on the employee, and in prices). For that matter, for the corporate income tax to be incident on consumers, the nominal return on investment must be higher than they would otherwise. If you eliminate the corporate income tax, for prices to drop, so must nominal returns on investments.
There will be no reduction in nominal wages as a result of removing the embedded tax cost. On the contrary, nominal wages may increase.As I explained, any direct tax on the employee that is incident on the consumer causes nominal wages to increase. To remove this tax and have prices reduce would mean nominal wages would have to be reduced.
Obviously you DON'T understand tax cascading (as you say):I understand cascading taxes, I don't understand "embedded, cascading taxes." Exactly which of our taxes in this country do you think does this?
Isn't he a piece of work?You spoke a little too soon. You didn't give me a chance to reply. I'm sure CG will understand and agree with my explaination. She understands these issues and is reasonable about them.
Water is dry. Red is yellow.
He thinks if he says something so preposterous enough, he's at least going to fool somebody. In the process, he looks quite foolish. Of course, he does have problems communicating clearly.
With a Roth, you have already paid income tax on your contribution. If you then pay NSRT on purchases when you withdraw those funds, you are paying twice.
The standard IRA is tax exempt when you contribute and that wouldn't be a problem.
The statement in #304 was:
“But those figures do not count the hidden, embedded taxes that have been embedded into the cost of everything we now buy.”
As you should be able to understand from this statement, once the embedded taxes have been paid they are embedded into the cost of a thing ... they are no longer taxes (which have, presumably, been reflected in the tax collections of the Feds as leprechaun9 said earlier) but they are now increased costs and must be paid for by someone. We are not separating personal or corporate taxes but taking them collectively as a part of the whole. They all go to increase the costs of the thing involved even though the tax portion required has presumably been paid.. Though they started life as embedded taxes, they are now plain old costs and not taxes as you keep trying to state.
These increased costs must be recaptured by buyer #1, and are largely passed forward (raising prices) to the next point in the chain where the process continues (we are ignoring the effect of the overhead of buyer #1 on these costs for this discussion). The next point in the chain (buyer #2 lets call him) sees what amounts to those increased costs received from the first point in the chain (buyer #1) and the overhead of buyer #2 burdens what were these added costs from buyer #1 increasing their cost amount at the end of buyer #2's chain - a multiplying effect on the original cascaded costs. These cascaded costs are now quite a bit greater than at the input to buyer #2 and buyer #2 will now have embedded taxes of his own, some part of which will now become embedded tax costs just as for buyer #1. (And again, that does not mean they are taxes - those have surely already been paid by buyer #2 and employees).
This cascading continues through the entire consumption chain growing as it goes with a multiplying effect for each buyer. None of these amounts (which let’s call cascaded costs) add anything productive to the thing involved unless you consider federal taxes productive. This is, in fact, the cascading mechanism that “the literature” (as you call it) refers to. The effect of the (already paid) taxes are actually multiplied and not just passed on in a linear fashion.
It is really no surprise that you don’t understand this mechanism. A lot of two-handed economists don’t either. Whether you understand it or not, it is still there, it functions regularly as things are passed along the chain from production to end consumption, and it greatly boosts the prices that the end consumer must bear at the last point in the chain.
It is, in a very real sense, a hidden tax caused by the income tax system. And, certainly, consumers never for the most part know they pay it. This will be eliminated by the FairTax and is one of the reasons that prices will decline.
To get an idea of this cascading, make up a simple spreadsheet starting with, say $1, and see the magic of cascading (whether called taxes or costs - with costs being the more accurate term for thinking about the process). This sort of cascading is what I refer to in #304 ... not the taxes themselves.
That's just it... Today, Roth IRAs pay fed tax and tax costs in prices amounting to 20-25% of the price. The fact that you don't see the receipt line item "Fed tax and tax costs" doesn't mean it ain't there!
How do you think a business, any business, pays its expenses and stay in business? They pay expenses with money earned from sales. They pay the light bill (which they cover with sales revenue), they pay the FED EX bill (covered with money from sales), they pay the water bill (paid with monies earned from sales), they pay everything, including "employer portion" payroll taxes, business income taxes, compliance costs, etc with money from sales. Of course, sales revenue is what they collect in sales - ie prices.
If not for the federal tax and tax costs (like emp payroll, business income taxes, compliance costs, etc), then prices would be 20-25% less to the retailer.
So when you withdraw money from your Roth IRA today and go buy a plasma TV for $1000, you've paid a price that includes some costs ($200-$250) that simply reimburse the retailer for his fed tax costs... and don't have anything to do with the product. They are costs that are passed along at every stage of production. The farmer has his fed tax and tax costs in his price of wheat to the miller. The miller in turn must recover what he paid for the wheat and increase the price by his fed tax costs (among other things) to the baker, the baker in turn must recover what he paid plus an amount to include his costs, and so on until the consumer pays an amount that will include ALL the costs.
The bottom line is you're paying a 25%-33% increase on purchases today due to fed taxes and tax costs - but most people don't know it until they think about it and realize that taxes and tax costs are just like any other expense in that they must be paid to stay in business. And what is the only indefinite stream of money that can be used to pay expenses? Sales revenue...prices
Today's prices include fed tax and tax costs. The nrst doesn't change the amount of premium on purchases - it just makes it visible. That many folks don't realize this is a testament to the effectivenes of our current tax system in its ability to hide taxes. The method of collection DOES impact taxes and spending.
Didn't you know that what anyone spends today is already being hit when spent to the tune of 20-25% of the price?
Didn't you know that prices include all costs, including tax costs?
Did you think a business can fail to recover expenses and survive?
Where do you think a business gets funds to pay expenses...including fed tax and tax costs???
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.