Posted on 08/26/2004 11:05:33 PM PDT by n-tres-ted
"btw do you have link/source for the 22% 'embedded' tax?"
I think the ancient one does.
What they really need to do is cut spending, cut the social welfare programs, get the federal government out of education and healthcare.
Still at least with a sales tax, it won't be only American workers getting the brunt of the tax burden with a very high income tax and Chinese getting all the benefit because there is no income tax cost on Chinese goods. It would equalize the goods produced here with those produced elsewhere --- the sales tax replacing the income tax would make American labor costs far far cheaper.
i have looked at their site and see that figure but i can't yet find a link to it... that doesn't mean it's not there, just that havent' found it yet...
as to producer versus consumer... i would suppose producer prices are prices paid by producer and that consumer prices are prices paid by consumer... or is it wierd?Nope, it's that simple. The reason I ask is that you are going to be given a quote by one economist (as if one economist makes it so) that says there would be a 22% drop in producer prices with a NRST. The FairTax supporters have led people to believe this equates to a 22% drop in consumer prices.
Ping
btw do you have link/source for the 22% "embedded" tax?
The 22% number is an average over time of the impact of repealing the income tax and replacing it with a revenue neutral retail sales tax would would have on producer prices.
As such it is not a reflection of just the removal business income taxes from producers per-se, but the cumulative sum of all cost factor reductions and improved efficiencies reflected in prices received by producers.
The basic studies from which this claim is based are by Dr. Dale Jorgenson:
PDF: The Effects of Fundamental Tax Reform and the Feasability of Dynamic Revenue Estimation
http://www.economics.harvard.edu/faculty/jorgenson/papers/baker.pdf
, in Joint Committee on Taxation, Congress of the United States, The Modeling Project and 1997 Tax Symposium Papers, Washington, U.S. Government Printing Office, November 20, 1997 (with P.J. Wilcoxen), pp. 130-151.PDF: The Economic Impact of Fundamental Tax Reform
http://www.economics.harvard.edu/faculty/jorgenson/papers/208.pdf,
Frontiers of Tax Reform, Stanford, Hoover Institution, 1996, pp. 181-196; reprinted in Joint Economic Committee, Congress of the United States, Roundtable Discussion on Tax Reform and Economic Growth, One Hundred Fourth Congress, First Session, 1996, pp 98-112.
The older study forming a foundational basis from the later one which treats an NRST in detail in comparison with an equivalent Flat Tax and 1996 tax law as baseline. The older study looking at consumption taxes in the form of VATs and the Flat Tax in light of 1987 tax reforms and other studies, with a 1996 baseline.
The conclusions and results of those studies and Jorgenson's General Equilibrium Model provided the essential economic basis on which the FairTax NRST was designed by the AFFT economists and legal beagles.
Looking over its content we find some interesting effects of a retail sales tax applied to imports and domestic products equally.
| ftp://ftp.usitc.gov/pub/reports/studies/PUB3110.PDF PDF page 33 Finally, Hines (1996b) argues that exchange rates move to reflect international differences in goods prices. Thus any increase in export competitiveness caused by a move to destination basis would ultimately be offset by appreciation of the U.S. dollar. Another line of reasoning is that countries use receipts from exports either to import immediately, or to make investments abroad which ultimately provide income to pay for a larger volume of imports in the future. Both of these arguments are based upon the observation that strong economic forces keep a country’s trade in approximate balance regardless of what other policy changes it may undergo. The likelihood that the change from an origin-based system to a destination-based system would in fact generate incentives to export and disincentives to import ultimately depends on the strength with which the long-run tendency toward balanced trade in fact operates. Grubert and Newlon (1995 and 1997) point out that a destination-based consumption tax does create an incentive for cross-border shopping, if goods can be reentered tax free, and for consumption abroad through travel or emigration. Finally, the ultimate effect of a flat consumption tax on the price of particular goods will depend on demand elasticities. Those goods for which demand is relatively inelastic may be able to pass through a larger price increase (tax inclusive) to purchasers than those with elastic demands.29 Whether this would happen in specific cases would depend, among other things, on the price behavior of production inputs and competing products. |
From what the paper you found has to say about the effect of a flat sales tax hitting both domestic manufacture and imports equally we would see
- an appreciation of the dollar (expanded purchacing power, e.g. lower prices) and
- an influx of investment from abroad in US industry,
to return trade balances back towards equilibrium over the long term after an intial surge in exports in relation to imports to the US..
Thus substantial benefit to the US economy and American standard of living arising from the implementation of retail taxes in place of the current income/payroll tax can be expected.
Strange, just what Jorgenson's results indicate should happen.
And supporting that survey Bill Archer references
Honestly, the number of pages is completely meaningless. Red herring. And besides, I'm completely in favor of cleaning up and simplifying income tax, and that starts with electing the right people to do this. But I haven't read one lucid argument yet why we need to completly scrap in favor of a theoretical one. We're talking about very serious business here.
Many uninformed Americans assume that it is.
Yeah, you know what? Spare me your 'subtle' insults in the future, ummkay?
>>HR25 would provide for the repeal of the 16th Amendment
A Repeal of an Amendment needs to be an Amendment as well. Can't be legislation.
True, but if you can sell an item for $20, it really doesn't matter whether it cost $0.02 or $.25. Or $5.00.
..." as to producer versus consumer... i would suppose producer prices are prices paid by producer and that consumer prices are prices paid by consumer... or is it wierd?"
======
Nope, it's that simple. The reason I ask is that you are going to be given a quote by one economist (as if one economist makes it so) that says there would be a 22% drop in producer prices with a NRST. The FairTax supporters have led people to believe this equates to a 22% drop in consumer prices.
===
please explain the differences between producer prices and consumer prices with respect to the 22%....
please explain the differences between producer prices and consumer prices with respect to the 22%....
Producer prices are what businesses pay for products used or sold in the conduct of business.
Consumer prices are what persons pay to aquire products for final use or consumption.
Thus the retailer and other businesses would pay 22% less for the products they purchase to conduct their business.
that's what i thought - and that much seems obvious... the other poster indicated that there is something insidious about the difference... see above a few posts to read what he said...
can you elaborate on his pov?
that is, 354 and 372
can you elaborate on his pov?Because a company producing widgets gets the materials they use to produce those widgets for 22% less does not mean the final retail price would go down 22% - there are the company's production costs, wholesale, distribution, and retail costs among other things. But we are led to believe by the supporters of the FairTax that consumer prices would drop 22%.
Well said. And add to it that items previously untaxed by sales taxes (namely food, drugs, etc ) will now be taxed.
can you elaborate on his pov?
I prefer to let Willies posts speak concerning his pov:
His preferred tax system:
Reason for opposition to the NRST
The NRST is an inherently regressive form of taxation that is truly despotic.
Long term, it would result in a two-tiered socio-economic stratification of our society.
It is not disimilar to a 21st Century eco-feudal system where the corporate aristocracy invest and expand their property holdings completely tax-free, while the serfs are overburdened with the excessive taxation on consumption and persuaded that it's supposedly "fair" because the consumption taxes are redistributed through the formal social welfare system.
Posing as "tax reform", the NRST (HR 2525) also represents a "land grab" where business interests are favored over individuals purchasing for their own use:
This a significant inequity between individuals trying to buy their own new homes and landord/investors looking to buy the same single family dwelling as a rental investment. This disparity has long term implications affecting the distribution of private property. The American tradition favoring individual property rights is reversed. The NRST would discourage individual "consumption" of real property.
- A family purchasing their own new home for $200,000 pays NRST at a tax-included 23% rate. This means that of the $200,000 paid, $154,000 goes to the seller, and the Gov't receives $46,000 in tax.
- A landlord/investor can exploit the business exemption of NRST and purchase the same new single family dwelling tax free as a rental investment for only $154,000. Tenants pay NRST on rent and Landlords act as tax collectors for the government
- The $154,000 vs. $200,000 purchase price advantage that landlord/investors enjoy over individual personal homebuyers can be expressed two ways:
- Landlord/investors enjoy a 23% discount compared to the individual personal home buyer.
- Individual personal home buyers must pay 29.87% more than landlord/investors.
"A home is NOT an investment, W/G, but merely a place to live."
Posted on 03/26/2001 16:27:50 PST by pigdog
To: pigdog, Willie Green
It's amazing how many people view a home as an "asset," as well. It's a frickin' LIABILITY.
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