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?
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?It's a matter of scale. If you keep prices the same with tax (lower sticker price) and lower my wages, I don't have much higher purchasing power. If you let prices rise with tax (sticker stay the same) and let my take home rise, I would have roughly the same purchasing power as the other scenario. The question becomes, which is easier to do, lower wages or make prices rise? In the end, this is really the decision of the Fed's monetary policy. Every (literally, every - including the authors of the FairTax) economist I've read whose has commented on the subject has suggested that the Fed would work to keep wages the same and raise prices.
"....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