Imagine receiving 100% of your paycheck!

townhall.com ^ | August 27, 2004 | Neal Boortz

[phil_will1]

"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."

How many businesses do you know that enjoy those kinds of overall profit margins? I was in technolgy for a number of years and my experience was that, IF you were quite fortunate and had a proprietary product with a significant advantage over its competition, you might be able to enjoy 50 - 60% gross margins for some time until the competition caught up. However, those were gross margins and, unless you could generate huge volumes, your before tax income was nowhere near 50%.

If there were any businesses out there recording those kind of enormous OVERALL margins, capital would be flocking to invest in them.

[ancient_geezer]

AG, the link to the Jorgenson/Wilcox paper didn't work for me.

Hmmm, interesting. I don't have any problem loading it at all though is a good size file to load on a telephone link.

This is the URL.

http://www.economics.harvard.edu/faculty/jorgenson/papers/baker.pdf

Might try pasting it to the address line instead of clicking on it, or clearing you internet cache and try again.

Note it is a PDF file and you may need the adobe reader to read it.

Though not having it would just send you to a download prompt instead.

[phil_will1]

"So, yeah, a cumulative record is gonna get bigger."

It isn't just getting bigger, YN. The rate of growth is ACCELERATING. At its most recent rate of growth, it is doubling every 8 years.

"And CCH isn't the 'tax system.' It's a company that publishes a cumulative record of everything having to do with taxes (legislation, rulings, hearings, etc.) going back to 1913! Including CCH's comments!"

If I understand your position, the tax system isn't cumulative? IOW, there is a statute of limitations that applies to the tax code, IRS regs, treasury dept rulings and court cases? Do you have a link to back that assertion up?

BTW, if you have a problem with how CCH defines the "tax system", may I suggest that you take it up with them? As for me, I consider them a more authoritative source for this information than you.

[Your Nightmare]

It isn't just getting bigger, YN. The rate of growth is ACCELERATING. At its most recent rate of growth, it is doubling every 8 years.

I'm not disagreeing that the code is too complex. But the CCH Federal Tax Register is not the federal tax system. It's a cumulative history (everything that's ever been part of the tax record) including CCH's own commentary on all this. It also includes tax court cases which do increase every year because the population increases every year. So the tax code is not 60,000 pages!

Again, I think the code is too complicated. If you want a summary of how it grown, there is a report here. It includes this graph:

[phil_will1]

The tax SYSTEM consists of far more than the IRC. If you don't believe that, try to defend yourself in tax court by saying that you followed the IRC strictly, but ignored treasury dept rulings and IRS regs. It won't wash. Anyone who does fairly sophisticated tax returns will tell you that they have to reference more than just the IRC to make sure that they are in compliance.

If you want to quibble over whether CCH's commentaries should be included or not, I don't have strong feelings either way. My guess is that they comprise a small part of the 60,000 pps that they calculate anyway. It really isn't worth taking the time to research to me.

The point of all this is that the rapid growth in complexity, which is getting worse as the years go by, is strong evidence that the notion of defining taxable income in a stable and consistent manner, which is what the change to an income tax was based on in 1913, is simply not achievable. The longer we wait to acknowledge the obvious, the more difficult the adjustment is going to be.

[Your Nightmare]

Standard Federal Tax Reporter includes the following looseleaf binders:

• Index - includes "About this Publication;" Topical Index; and miscellaneous practice aids.
• Internal Revenue Code (2 volumes) - includes "How to Use the Code Volumes;" Code Topical Index; Source Notes--Finding List; Code Table of Contents; full text of current code and amendment notes; and Related Statutes.
• Compilations (18 volumes) - include full text of Internal Revenue Code sections; regulations and proposed regulations; excerpts of committee reports; CCH explanations; and annotations of cases and rulings beginning in 1913.
• Volume 19 includes Topical Index to 2002 Developments; Cumulative Index to 2002 Developments; 2002 Finding Lists; 2002 Case Tables; Supreme Court docket; 2002 Legislation; Regulations Status Tables; full text of 2002 Rulings; 2002 Treasury Decision Preambles; digests of selected IRS Letter Rulings; digests of 2002 Tax Court Decisions; CCH Comments; and CCH Tax Focus and Features.
• Citator (2 volumes) - includes "How to Use this Citator;" Current Citator Table; main citator; and Finding Lists. U.S. Tax Cases--Advance Sheets - includes Proposed Regulations; Digests Last 2001 Court Decisions, not received in time to be included in the compilations; and 2002 U.S. Tax Cases

[Your Nightmare]

I don't have any I can find on the web.

I've seen this method used on the web before. I've updated it with correct numbers.

Embedded Tax Calclulation

• Total revenues collected by Feds in '03 = $1,782 billion (17.71% of prices)

Those tax components which will not change prices as a consequence of enactment of HR25

• Individual Income Tax (Labor) = $793.70 billion
• Employee half of Social Insurance = $674.98/2 = $337.49 billion
• Excises = $67.52 billion
• Customs Duties = $19.86 Billion
• Miscellaneous = $34.42 Billion

============================

• Total constant price factors = $1252.99 billion
• Remainder federal tax components affecting price = ($1,782-$1,252.99) = $529.01 billion

Adjust for a conservative $343.85 billion cost of tax compliance, (The Flat Tax; Hall & Rabushka, '95, What the Income Tax Costs the American People: quoting James L. Payne estimates 65 cents for each dollar of revenue collected).

• Total tax related factors affecting consumption price = ($343.85 + $529.01) = $872.86 billion

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

17.71%*($872.86/$1,782) = 8.67% reduction in consumption prices

[Chilldoubt]

got adobe 6.0?

[Chilldoubt]

mark for later

[ancient_geezer]

You're getting ahead of yourself YN.

Your numbers are inconsistent with the conditions under which the NRST of HR25 were set, and your estimate of compliance costs are far too low. Business portion of the compliance burden is a substantially greater portion of the total economic burden than the portion non-profits and individuals. That is why the compliance costs are roughly $800 billion for companies and the remainder of $500 billion split between individuals and non-profit organization.

The rebuttal of your attempt to change data invalidly is going forward here:

==> http://www.freerepublic.com/focus/f-news/1196095/posts?page=233#233

We reset back to the valid data set and conditions under which the NR25 NRST rate was established, pre Bush Tax Cuts.

Any calculations that need to be updated after the new studies under the congressional research staff at the Library of Congress, will be I assure you. But until then one should restrict themselves to the period and conditions which are valid for the bill, 1997-2000. Subsequent period looks to be coming in much lower with 18-20% range on the new NRST rate current economic conditions.

Reset:

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.

[Your Nightmare]

You continue to post numbers that have been conclusively shown not to be accurate. Why?

[Your Nightmare]

Total revenues collected by Feds in '00 = $2,025 billion

(33.6% of consumer price [per Robbin's 1999 federal tax contribution to prices] )

If this were accurate the total prices of goods and services in 2000 would have been ~$6,075 billion. It wasn't. It was much higher. The 33.6% is flat out wrong. You can't even describe the method they used to determine that number. It's completely arbitrary!

[ancient_geezer]

You can't even describe the method they used to determine that number. It's completely arbitrary!

Your repeating yourself, answer already provided to you here:

http://www.freerepublic.com/focus/f-news/1196095/posts?page=248#248

As far as a ballpark verification of the value goto 1998, GDP/NIPA, that was undoubtedly the essential source from which the percentage would have been extracted. Think real hard on it.

[Your Nightmare]

Your repeating yourself, answer already provided to you here:

I'm repeating myself because you keep posting the same number that you can't explain the methods used to derive it. The answer certainly isn't where you pointed me to.

[Your Nightmare]

As far as a ballpark verification of the value goto 1998, GDP/NIPA, that was undoubtedly the essential source from which the percentage would have been extracted.

Well you're applying it to 2000. In 2000 expenditures and exports were $9,556 billion! But even still, 1998 prices were $8,352 billion! Much higher than your number using 2000 tax revenues.

The 33.6% number is wrong. You can't tell me how it was determine. You can't defend it.

[Chilldoubt]

just because ancient geezer doesn't explain it doesn't mean we can discount its validity. i am still reading on some links so i'm unprepared to jump in yet, but i'd like to see an explanaiton of why you take the position that the 33.6% is wrong. again, not explaining it or not defending it is not a valid reason to discount it. he did provide a link to the dry cleaning example - what is wrong with it - other than ancient hasn't explained or defended it?

also i noticed the cost of comliance was too low in your example - and to be clear are you using tax inclusive or tax exclusive rates?

[ancient_geezer]

The 33.6% number is wrong. You can't tell me how it was determine. You can't defend it.

http://www.freerepublic.com/focus/f-news/1196095/posts?page=248#248