That's the only issue I have about NRST. That companies will see "higher profits" and not be motivated to really lower the price. Some would, certainly, but how soon? Granted, when people start balking at the cost plus the new tax, it would result in a downward shift. But would they go all the way down to a rate that didn't include current taxes?
The only thing I don't really see happening is companies actually lowering the cost of goods. Basically, they've got us paying prices we're used to.
You are used to paying a specific total amount for goods and service today, that's embedded taxes plus base taxfree prices.
Under the NRST, all that really happens is the embedded tax gets separated from the pricing and listed as separate line items on your receipts.
The downward pressure comes from supply and demand, and the efforts of companies to keep their market share. The supply/demand equilibrium level of todays price(embedded taxes + taxfree price) and the (NRST + taxfree price), are the same. Nothing about the NRST changes that.
But would they go all the way down to a rate that didn't include current taxes?
Market factors set more than same total cost in consumer prices today.
DO YOU PAY YOUR INCOME TAX
AT THE SUPERMARKET?
by D. Sherman Cox J.D. L.L.M. Taxation
The full impact of the federal tax system(taxes in gross wage/salaries & other compensation + business income/payroll taxes) added onto the base(taxfree) price of retail consumption goods and services is 36% for federal taxes alone.
All wages and the taxes on them are paid for out of sales receipts to business,(i.e. consumption expenditure).
family consumption expenditure is gross income less taxes and savings.
Federal tax revenues collected as % of family consumption expenditure = fed/(1-state-fed-savings) =
23.5/(1-.235-0.102-0.012) = 36.09%
If we add in the cost of federal tax compliance, planning, litigation & enforcement, the percentage that truely represents the burden on the family due to the Federal income/payroll tax system, product prices are increased by more than 55% over taxfree prices.
Where Have All the Dollars Gone?
How the government robs Peter to pay him back.
By economist James L. Payne, Reason Magazine February '94When the overhead costs are added together, (24 percent compliance costs, 33 percent disincentive costs, and 8 percent other costs), they total 65 percent of tax revenue.
Current total Federal tax revenues are about $1900billion, more than $1,000 billion additional dollars are added on onto consumption prices due to the business costs of complying with the federal income/payroll tax laws.
The percent total current federal burden (taxes + compliance costs) of consumption dollars = 36*(1900+1000)/1900 = 54.95% economic burden added on to base retail(i.e. taxfree) prices.
Too bad that citizens don't get a receipt detailing those "hidden sales taxes" buried in their consumption purchases. If they ever did, some of those 70% of the public clamoring for more from government, thinking someone else foots the bill, might be tempted to change their mind.