Nonsense as Usual: Bush Contention that Tax Reform Is Key to Manufacturing Competitiveness

AmericanEconomicAlert.org ^ | Wednesday, April 14, 2004 | Alan Tonelson

[meadsjn]

And the clear lesson for anyone following globalization issues: Tinkering with the tax code won´t stop or even stem trade-related job flight.

Partially correct. "Tinkering" won't do the job. Abolishing the income tax for individuals and businesses will.

The NRST would replace wage withholding for income tax, social security, and medicare, as well as business income taxes and a few others, and replace them with a retail sales tax at the final point of sale.

The NRST would apply to foreign-produced goods as well as American-produced goods. Foreign produced goods currently avoid the markup that must be made on the prices of American products to account for the payroll taxes incurred at every stage of production, transportation, and sale.

Businesses and the "wealthy" would have no need to shelter their earnings offshore, or invest offshore, or send their factories offshore, or solicit the substandard offshore labor, if their income was not targeted by the IRS monster, and their domestic payrolls were not padded by one third to one half to feed that same beast.

The NRST would immediately make American-made products competitive in world markets again.

The NRST would remove the biggest obstacle to self-employment and business start-up we currently have - the IRS and its morass of crippling, threatening tax ciphers and regulations.

[ninenot]

Huh?

Look, I'm not real sophisticated but if the proposal simply taxes purchases, then it's PROgressive, not REgressive--that is, the more one spends the more one pays in tax.

IIRC, the proposal has a 'family-wage' component. What's the big deal, aside from the usual waste and corruption in the Fed Gov--which is going to be there no matter?

[JohnnyZ]

or could it be that there's something extremely misleading about the statistics you cite?

ROFL! If you don't like the numbers, just retreat into denial!

[ninenot]

You guys ought to read the article.

Now we can take taxes out of the equation, too.

Lemmeeeseeee, heah, pilgrim(s): all youse got left is regulation (admittedly onerous) and cost of labor.

When UNIX ports can be done by remote-control from China, rdb, things are gonna look grim...

[Poohbah]

You like to describe other people's impending doom with onanistic glee.

[ninenot]

Actually, while the numbers for manufacturing (NY State, Philly Fed, Virginia Fed, KC Fed, and PMA) all look VERY good (thank God...)

There's a bit more to the story.

China's industrial sector has been having double-digit gains straight through 'the recession' and yesterday's newspaper advises that they are running out of capital to support the growth.

NOW we begin to see increases in activity in the USA.

2+2=4???

Occurs to me that the USA may be the "marginal producer;" our factories gear up only when China's factories run out of capacity. IOW, we are the high-cost production plant, which is shuttered except for cases of dire need.

Hmmmmm?

[ninenot]

Businesses and the "wealthy" would have no need to shelter their earnings offshore, or invest offshore, or send their factories offshore, or solicit the substandard offshore labor, if their income was not targeted by the IRS monster, and their domestic payrolls were not padded by one third to one half to feed that same beast.

You'd better read the article at the head of the thread again.

The gist of it is that many of the large corp's do NOT pay US income tax as it is--or that the effective rate is FAR less than the 35% nominal rate due.

They are not offshoring for tax purposes (unless they are extremely stupid.) They are offshoring for LABOR cost purposes.

[gipper81]

GO TO A NAT'L SALES TAX

And your research shows that the VAT has worked out oh-so-well in Europe?

[MNJohnnie]

GO TO A NAT'L SALES TAX
CUT REGULATIONS
KILL THE TORT LAWYERS!

Problem Solved!


Exactly, unlike the "make every American an economic serf to uncompetative American businesses and out of control Labor unions" plans of the "fair trade" loonies. Unlike the what the "Fair trade" loonies scream MORE Goverment interference in the market is NOT a workable solution. IT has NEVER worked at ANY time in history, why do they think they can make it work now?

[ninenot]

I have a delightful wife.

YOU have Onanism.

[Willie Green]

our factories gear up only when China's factories run out of capacity. IOW, we are the high-cost production plant, which is shuttered except for cases of dire need.

No, when our factories are "shuttered", they're generally shut-down permanently and dismantled.
The stats merely reflect the activity of the diminishing number that have remained open.
It is to be expected that they'd experience some "increase" by picking-up the business formerly performed by the domestic competition that has closed. But the overall trend of outsourcing our industrial infrastructure (including high-tech manufacturing) remains.

[ninenot]

an economic serf to uncompetative American businesses and out of control Labor unions"

Right. It's both the fat, lazy businessmen AND the fat, lazy Union types.

Earth calling Minnesota!!

Unions only hold 13% of factory positions in the USA. "Uncompetitive" businesses? Name one, aside from baseball!!

[kaktuskid]

A nat'l sales tax is paid ONCE (at retail), VATs are paid throughout the manufacture-distribution-sales cycle!

[meadsjn]

They are offshoring for LABOR cost purposes.

And the cost of payroll deductions and compliance push the cost of American labor far beyond the actual take-home dollars the laborer ever sees. These costs are multiplied for all the labor required for every step of the production process, from the mining of raw materials, to the cash register.

It matters little who is technically required to "pay" which portion of the taxes on labor -- the costs are transferred to both the customers in the final price, or to the workers in lower wages.

And no, I wouldn't expect many corporate managers to share their tax relief with their customers or their employees. They will charge what the market will bear for their products and services, and they will purchase their labor and materials to minimize their overall cost of goods sold. Only competition will force them to reduce their prices, and with the IRS and its tax ciphers removed from the equation, competition will be much more fierce.

Removing the payroll taxes on US labor will reduce both the cost of American labor and the cost of acquiring American materials, because the costs of American materials are also artificially inflated to compensate for the payroll taxes involved in all that labor and all the labor required to transport the materials.

Taxation based on income is a slave tax for individual workers, and it is a drag on the engine of our economy.

[ninenot]

Until the 16th was ratified (still in question...) we did quite well with a telephone-use tax and TARIFFS!!!

Imagine that!

[gipper81]

From a macro perspective, the consumer gets hit in the end regardless how how it is technically administered. I am tired of getting hit.

My point about sales taxes and VATs is that they always go up over time. Always. Started out low in Europe and climbed and climbed. Politicians love these taxes because they are so very close to the revenue faucet.

[rdb3]

When UNIX ports can be done by remote-control from China, rdb, things are gonna look grim...

Not for me they won't. What? Do you think that my IT career is the only iron I have in the fire?

Hardly.

I have used and will continue to use what I have to grab the world by the ankles and shake the paper out.

rdb2 raised and taught me well, and that's season-in, season-out.

Show 'em my motto!

[rdb3]

I see you have not yet shed your class-concious blinders.

What? I thought I was the only one who saw things this way.

Show 'em my motto!

[EternalVigilance]

My point about sales taxes and VATs is that they always go up over time. Always. Started out low in Europe and climbed and climbed. Politicians love these taxes because they are so very close to the revenue faucet.

VATs suck even worse than income taxes. Why? Because they are even more hidden. No sane conservative would give an ounce of support to one.

At least with the National RETAIL Sales Tax, EVERYTHING would be out in the open.

With just this one tax, ALL Americans would then be united in one interest: lowering the rate. It would be the only tax debate left out on the political table.

This is the only way to create a political climate that is conducive to putting the fed guv back within its constitutional limits.

Visibility is the key.

[meadsjn]

My point about sales taxes and VATs is that they always go up over time. Always. Started out low in Europe and climbed and climbed. Politicians love these taxes because they are so very close to the revenue faucet.

Both the House and Senate versions of the NRST stipulate that a two thirds majority is needed to raise the tax rate; a simple majority can decrease the tax rate.

Unlike the current income tax, SS tax, and Medicare tax, the NRST will be visible to every consumer and every voter. Politicians will be more pressured to reduce spending than to raise the tax.

The NRST is the only solution to offshoring, yet proposed, that will reduce the level of government interference in the economy.