I don't disagree that some price reduction will occur. I just don't see any beyond a portion of corporate income taxes (not all of them) the employer's share of FICA and the elimination of compliance costs. The latter two don't represent but a tiny part of the final product's price. The former comprises the larger part. IMO, any significant decrease in prices can only come from lowered wages and that can't jhappen in some cases (union shops).
Now OHelix gave an example earlier which included the cascade effect. Let me put my spin on it: Bike Company buys it pedals from company A, it's tires from company B, its frames from company C and its seats from company D and all have been profitable companies in the past and are paying a 35% corp tax rate. With the flat tax they each retain an extra 10% of their profit now. They choose to lower their prices each by 10%. Now we have Bike Company's cost of goods, which represents 50% of its production cost, lower by 10%. Also: Bike Company now pays no income taxes, thereby saving itself another 10% a year. Am I missing something or did Bike Company just come up with a way to lower its prices by 15%. Am I on the right page OH?
Don't forget that the pedal company has 3 suppliers who have suppliers who have suppliers who have suppliers, etc. all the way to oil drilling for the petrol to create the resin.
Same idea for the tire company, the frame company, the handle bar company, the seat company, the assembly fixture company, the toilet paper company, the xerox machine company, the reflector company, the display rack company, the promotional sign company, and on and on and on.
Close, but I think there is a mathematical error. 10% increase in PROFITS does not necessarily mean you can drop your PRICES by the same rate. For instance:
Cost = 90$
Sell for $100
Profit = $10
Profit increase of 10% from reduced costs yields:
Cost = $89
Price = $100
Profit = $11
Reducing price by 10% yields:
Cost = $89
Price = $90
Profit = $1
It's easier to keep track of everything if everything is represented as a percentage of total receipts. Then the percentages can be compared with one another with less risk of confusion.
If the bike company, as you said, has half of it's production costs, presumably the other costs are wages, we would still need to know their margin or their percentage of taxes paid to figure out what a reduction in the 35% rate would benefit them in terms of reduction of cost.
But whatever the amount that the TAX savings would afford company, that amount could be used to reduce prices. But there would also be an additional reduction in it's costs, as it's suppliers would experience similar reduction in taxes, as well as reduction of costs from their's suppliers, and their suppliers, etc. However, at each stage you go back, the cascaded effect on the final company gets exponentially smaller. Using calculus, the limit of the effect can be determined and treated as the actual amount.
For instance. If I open an account with $2.00, and each day I add half what I added the day before, I will never be able to achieve a balance of $4.00, but I will get exponentially closer to $4.00 each day. Each day I close the gap by half, but never actually arive. The same dynamic works in my earlier example.
IN the earlier example, the ACTUAL savings would be more than the initial estimate of 9.75% savings from TAXES ALONE. Assuming all the other companies in it's production tree were in the same financial parameters, you can calculate the over all savings, including the cascading effect, to be ~17%.
If anyone knows who has a Mathmatics or engineering ping list, ping them here and they can probably yield a lot of insight to this discussion. Maybe they can take me to school and show me an error I've made. :o)