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To: Your Nightmare
Correcting for your inadvertantly included Gift/Estate taxes into the group of revenue sources not affecting prices. As I see Gift Estate taxes a factor inducing price variability as of most concern to small family businesses and farms, the tax hitting the generation to which the business is passed increasing the costs attributable to those business elements, while larger businesses and wealthy more estate planned folks tend to pass such properties through corporations and trusts to avoid those impositions.

So onto the calculation using the most accurate treasury measure for revenues collected, and putting Gift/Estate tax back into the components affecting price, you will note that the change is quite marginal,

22.64% as opposed to 22.18% under you assumptions for Gift/Estate taxes.:

Indeed a very marginal change in results.

I refer you to the section of the following article about the Income/Payroll tax system and its impact on our economy "A. Hidden Upstream Taxes. " paragraph 39.

"[39] Dr. Dale Jorgenson, Chairman of Harvard University's Economics Department, believes that the price of goods and services are inflated by about 20 percent or more by upstream taxes consumers ultimately bear. In a recent paper Dr. Jorgenson estimated the built-in taxes contained in the price of goods and services. /22/ In the chart above, he quantified the hidden component of tax, estimating that producer prices would fall on repeal of upstream taxes an average of about 22 percent."

Looking at the accompanying chart, the range of values from industry to industry appears to be about 12-25%.

Economists Gary and Aldonna Robbins of the Texas-based Institute for Public Policy examined the case of dry cleaning a shirt, with a particular eye toward uncovering the hidden costs of taxes in price.

The Robbin's attributed over 33.6% of "consumer prices" to be due to federal taxation passed on to the customer.

http://fms.treas.gov/mts/mts0901.pdf

  • Total revenues collected by Feds in '00 = $2,025 billion
    (33.6% of consumer price [per Robbin's 1999 federal tax contribution to prices] )

Those tax components which will not change prices as a consequence of enactment of HR2525

  • Individual Income Tax (Labor) = $1,004.5 billions,
  • Employee half of Social Insurance = 648/2 = 324.0 billions,
  • Excises = $68.9 billion
  • Customs Duties = $19.9 Billion
  • Miscellaneous = $42.7 Billion
    ============================
  • Total constant price factors = $1,460 billion
  • Remainder federal tax components affecting price = (2,025 - 1,460) = $565 billions

Adjust for a conservative $800 billion cost of tax compliance,
    (The Flat Tax; Hall & Rabushka, '95,What the Income Tax Costs the American People: quoting James L. Payne estimates 65cents for each dollar of revenue collected)

  • Total tax related factors affecting consumption price = (800 + 565) = $1365 billions

Estimated change in consumption prices as consequence of enactment of a National Retail Sales Tax, repealing all business income and payroll taxes:

33.6*(1,365/2,025) = 22.64% reduction in consumption prices

Which more than verifies the Jorgenson empirical study of a 22% fall in producer prices

The two sources are in reasonable agreement, Just using static analysis taking the repeal of SS/Medicare taxes as well as income taxes into account for HR25.

I see 20-25% a reasonable value to expect retail prices to fall, not only for customers here in the United States, but in our exports as well making them far more competitive on international markets.

 

Accounting for productivity enhancements and other economic growth factors would add to the potential for decline in consumer prices as can be determined from Jorgenson's studies! But would be beyond the scope of this validation.

 

To do a more up todate calculation will require a bit of research as I am not sure we can stretch the Robbins 33.6% contribitution of federal taxes to consumer prices to necessarily be the same 5 years later under current lower tax rate condition. Because business taxes are somewhat lower today due to Bush tax cuts, the impact of just lowering the current tax rates would undoubtedly lower the percentage of price due to federal taxes a small amount just as it would allow a lower NRST rate as well. Though I will leave that calculation for the future as we see how the federal tax scene actually changes under the next adminsistration, whether it be Bush or that other guy who served in Viet Nam or something.

201 posted on 08/26/2004 4:54:38 PM PDT by ancient_geezer (Equality, the French disease: Everyone is equal beneath the guillotine.)
[ Post Reply | Private Reply | To 197 | View Replies ]


To: ancient_geezer; Your Nightmare
Economists Gary and Aldonna Robbins of the Texas-based Institute for Public Policy examined the case of dry cleaning a shirt, with a particular eye toward uncovering the hidden costs of taxes in price.

LOL! It's easy to come up with 33.6% tax on a $1.10 dry cleaning when you break everything down then guess that the tax on each item's gross is 33.6%...Was there any money left for Texas?

These guys are what you're using as an example of imbedded taxes?...who's the fool in this picture?

206 posted on 08/26/2004 7:01:53 PM PDT by lewislynn (Why do the same people who think "free trade" is the answer also want less foreign oil dependence?)
[ Post Reply | Private Reply | To 201 | View Replies ]

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