amd are you including or excluding the possibility of wage increases? that is are you attributing the 22% solely to prices or are you allowing for some to be put into higher wages (ie the possibility that the employer's share of payroll tax go to the emp rather than to the emp then prices?)
amd are you including or excluding the possibility of wage increases? that is are you attributing the 22% solely to prices or are you allowing for some to be put into higher wages (ie the possibility that the employer's share of payroll tax go to the emp rather than to the emp then prices?)
I assume you address this one to me.
First the average 22% drop in producer prices that is generally referred to in regard to the '97 Jorgenson/Wilcox paper drawn from his General Equilibrium Model in simulating the economic effects of Flat taxes or Retail Sales taxes replacing income taxes alone as they compared to the '96 tax law baseline economy. That 22% is used as a conservative baseline for discussion recognizing repeal of the payroll tax as well would enhance the overall results.
From what I understand of the Jorgenson models the fall in prices in the studies, is a consequence of all economic factors that arise from repeal of the income tax, not just the the tax per-se. IAmong those factors must be included attendant reduction in costs associated with dealing with the tax & legal system, increased productivity achieved from multiple factors including all changes in resource allocations and their consequences.
Obviously labor allocations will adjust in directions that promote productivity as resources are redirected from addressing tax iand towards more productive activites and capital investment. The manner in which those changes take place will undoubtedly be quite varied ranging from natural attrition and not rehiring as productivity increases, transfering personel released from working on tax law into more productive capacities, even to targeted wage increases as merit incentives etc., especially in the expanding economy that is projected in the Jorgenson/Wilcox paper.