Posted on 01/31/2005 7:12:16 AM PST by bmweezer
Outsourcing isn't part of the labor supply. Labor supply is domestic labor. Particularly in the model I was commenting on, the "Rest of the World" is completely separate from labor. Saying labor supply, in economic terms, includes foreign labor is the "ridiculous, unfounded assertion.""Do you think that a study that has the labor supply increasing 30% in one year should be thought of as accurate?"As previously posted, with outsourcing, the labor supply is not a limiting factor.
Ohelix, watch this exchange and tell me that YN isn't disengenuous. Also, you credited him for making a mistake earlier on this thread and then admitting it. Want to bet that he sticks with his ridiculous unfounded assertion that "outsourcing isn't part of the labor supply"?
When you ask him for a link to the proposal that he favors, he insultingly says there are many studies out there on the generic tax forms that he favors.All the studies I've seen of a NRST are generic.
He criticizes the economic studies which have been done on the FairTax, but offers none in support of his preferred alternative.I've also ask you where I can get any study of the FairTax. I've never seen one.
140 million = # of individuals plus businesses? 20 million = # of large business retail outlets plus small corporations (one storefront) plus Subchapter S one-man businesses?
You realize that the Subchapter S businesses will grow dramatically?
Very well said Badray.....
I agree in entirety. The Fair Tax is the only proposal which severs the right of the government to confiscate private property in the form of paycheck withholding and / or lien and levy of personalty and realty. It unshackles this and future generations and would allow us to leave a legacy of increased liberty to our children. You have correctly observed that WE owe that to the previous generations who fought and died to preserve liberty.
The concept of which you speak is known in economic circles as "opportunity cost." It is far more difficult to quantify and project than nominal dollar costs. The opportunity cost associated with losing dollars today to FICA and Medicare taxation (a full 15.3%, not the 7.65% gobbermint would have you believe) is significant. Whereas you can take a stab at projecting the nest egg you could build if you had those dollars to work with, it does require some assumptions specific to the individual. Sounds as if Biker is a good manager and that the dollars would definitely be better in his hands that the gobbermints gruby mitts. I would use the most favorable assumptions in his instance.
It is far more difficult, but potentially far more important, to estimate the opportunity cost associated with inhospitable business environment created by the US tax code, but it is something that should be considered. (Title 26 of the US Code, available at: http://www.gpoaccess.gov/uscode/index.html Just looked up that web address....find that they are only current through year 2000. This will do you little good with respect to our tax law. I confess I usually use a commercial database to do my research.)
Economists far more degreed and pedigreed than I am have estimated that we would see approximately a 13% growth in GDP as a result of the removal of the Title 26 millstone and the concurrent imposition of a sales tax. That's the ball to watch.....investments would perform quite well in that environment and IMHO would far offset any nominal dollar tax that was later imposed when the proceeds of the investment accounts were spent.
Badray, you speak so highly of me that you set me up for the fall..../blushing/....I am not worthy of your high praise, but I thank you for the kind words nonetheless.
1) What rate will they start at?
2) Who is to stop them from raising each year?
So, You sooner or later end up at today's rates and NONE of the deductions!
Flat tax is a shell game as far as I am concerned.
If I am self-employed, I send the government the entire 12.4%. Under the NRST, I keep the 12.4% and can give myself a 6.2% raise? (The 6.2% deducted from each paycheck would be returned, plus the company contribution of 6.2% is returned to the company to do with at it sees fit?)
Now, how does this work if I am employed by a major corporation? Do I get the entire 12.4%?
"You realize that the Subchapter S businesses will grow dramatically?"
Subchapter S is named after the section of the Internal Revenue Code that establishes them. When the Internal Revenue Code is repealed, there won't be any such thing as a Subchapter S corporation.
I thought I read that total U.S. payroll is around $25 trillion? If so, then the federal government can live on 10% across the board, no exceptions, no deductions, everyone pays (you earn $1000/yr., pony up $100.), constitutional amendment to that effect.
"Subchapter S is named after the section of the Internal Revenue Code that establishes them. When the Internal Revenue Code is repealed, there won't be any such thing as a Subchapter S corporation."
Irrespective of the above answer, which is technically correct, the larger point is that there is an opportunity for fraud and abuse with respect to personal consumption items being channeled through companies as tax exempt purchases. This is something that will have to be monitored. It is certainly fair to say that a sales tax will present a different set of compliance challenges than an income tax has.
However, it is not at all accurate to say that compliance will be more difficult than with the current system. When you consider just the fact that illegals will be paying taxes at a disproportionate rate to the rest of us, that will go a long way toward improving the overall allocation of the burden. A recent study by Bear Stearns indicated that the underground economy, expecially illegal immigrants, may be twice as much as previous estimates.
The designation "Subchapter S" may go away, but the function doesn't. These one-man "corporations" will increase dramatically to get the tax-exempt status.
(Send an auditor to prove that I didn't purchase 3000 gallons of gas last year for business purposes -- thereby saving around $2000 in taxes.)
"....Imbedded taxes include the taxes paid by a deliveryman who delivers to Wal-Mart. His imbedded taxes could have no effect on the system unless his wage falls. Do we all agree? I can see no way that removing his embedded taxes will allow prices to fall unless his wage falls.
Maybe I'm dense, but why wouldn't his gross wage fall? Why would his falling gross wage be a bad thing?
Whether as an employee or as an independent contractor, the lower cost of making deliveries to the retailer will help lower prices, right? Am I missing something?..."
I've not read the entire portion of this thread, so forgive me if I state the obvious, but I think I see the fallacy here........
Taxes which are truly incident on the delivery man ARE NOT embedded in the price of the good or service. The fallacy here is the notion that a tax can be incident on two individuals / entities simultaneously. In gross total, entity level taxation can be borne by more than one entity, but the total of the tax cannot be multiplied in the process.
If the delivery man bears the incidence of the employer portion of FICA, it can't be also embedded in the price of the good. If the delivery man bears any incidence of the corporate tax, that portion which he bears as a lower wage is not embedded in the price of the good. If the investors in the corporation bear the incidence of the corporate tax, it can't also be embedded in the price of the good.
Estimates in price reductions based on the idea that consumers bear 100% of the incidence are misguided. I think it's far more accurate to speak in terms of 'total purchasing power' remaining unchanged as a result of improved Return on Investment, price reductions and increased wages.
Some goods, like bread which cannot be imported and the demand for same is relatively inelastic, probably bear the full incidence. Other goods, which can be imported and there are ready substitutions in the market and or demand for same is elastic, probably bear little of the ultimate incidence of the corporate tax. Looking at a total market basket of goods purchased by the average American, and making blanket statements about price reductions is a difficult task. The reality is that NO ONE can accurately say where the ultimate incidence of the tax reposes until we look at changes in prices after the FairTax is enacted. What we can say with certainty is that the FairTax is calculated to be revenue neutral in year one, and that means that in gross total, we should be in roughly the same position we were in before the Fair Tax was enacted.
What am I missing here?
For a discussion of the shifting sands of the incidence of the corporate tax, please see ftp://ftp.iret.org/pub/BLTN-88.PDF
If I am self-employed, I send the government the entire 12.4%. Under the NRST, I keep the 12.4% and can give myself a 6.2% raise? (The 6.2% deducted from each paycheck would be returned, plus the company contribution of 6.2% is returned to the company to do with at it sees fit?)No, not unless you renegotiate with your boss (and I wouldn't be surprised if labor unions do this). The general consensus on the incidence (who really "pays" for it, not who sends in the check) of the employer portion of the payroll tax is that workers pay for it through lower wages. Remove the payroll tax and you would expect to see upward pressure on wages.
Now, how does this work if I am employed by a major corporation? Do I get the entire 12.4%?
If you are self-employed, then you would receive the benefit of the Self-Employment tax being eliminated asa well as your income tax. The only way that would not be the case is if your clients refused to keep paying you the same rate.
Wow, I know you might not take it for much coming from me, but great post. You've put it clearer than I have been able to (and I've been trying).
"I'm still waiting for someone to give me a reasonable explanation of how prices can stay the same with the 30% sales tax while we are taking home what use to be withheld from our paychecks and getting $500 a month from the government. They don't call it the FairytaleTax for nothing."
How about the matching contributions made by our employers, yet not reflected anywhere on a paycheck. Add to that the reduction in compliance cost throughout an entire supply chain and intuitively a reduction would occur in the cost to produce a product or provide a service.
"Flat tax or VAT."
Please explain to me the advantages of a VAT over the NRST, or for that matter over the current boondogle we have today? If you truly support a VAT, then your motivations are clear to anyone with any understanding of economics. If this was an error, then disregard that statement.
Why do you prefer to keep the cost of government hidden?
What prevents both a sales tax and income tax today?
"Then you thought wrong. Economically, a credit-invoice VAT is no different than a NRST."
Except that one is clearly visible to every citizen and the other is hidden.
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