This is where I'm having a problem and I admit that YN's latest data tend to support him. You can't have more embedded taxes than there are taxes paid.
You can't have more embedded taxes than there are taxes paid.
You can however have a greater embedded tax burden comprised of both overhead costs and tax. With repeal of taxes costs are reduced as well.
A lowering of prices received by producers is enabled by more than just savings in tax revenues remitted per-se.
| http://www.taxfoundation.org/compliance2002.html |
Overhead Compliance Costs The complexity generated by the growth and constant change of the tax code creates two general types of economic cost: overhead and opportunity cost. Overhead can be divided into three principal activities: the economically sterile exercises of tax planning, compliance, and litigation, all of which act like tax surcharges on taxpayers. *** snip ***
The Burden of Compliance Costs As shown in , and , the Tax Foundation estimates that in 2002 individuals, businesses and non-profits spent over 5.7 billion hours complying with the federal income tax. Using an hourly cost of $29.98 for individuals and $37.26 for businesses and non-profits, the estimated cost of compliance in 2002 is $194 billion (See Methodology section for details about how the hours and wages were determined)—Individuals bear a cost of $86.1 billion, businesses bear a cost of $102.5 billion and non-profits bear a cost of $5.4 billion. Therefore, the overall compliance cost surcharge alone amounts to nearly 20.4 cents for every $1 collected by the federal income tax. |
Taken altogether, the total tax burden impressed upon us all through higher prices and loss of productivity exceeds the mere revenue collected by the governments by substantially more even than the $593 billion estimate of James Payne in 1995:
Town Crier Staff Writer
Clyde Noel : http://www.losaltosonline.com/latc/arch/9528/"In a book titled "Costly Returns," economist James Payne estimates the nation's bill for tax record-keeping, audits, filing tax attorneys and accountants totals an astonishing $593 billion. To put it another way, that's more than twice as much as last year's entire defense budget and $240 billion more than all 1996 Social Security outlays."
or the broader estimates for example like that of Daniel Pilla:
Killing the IRS, By Daniel J. Pilla, Reason Magazine July 1995
"There is little about a flat-tax system that will trim the staggering cost of tax law compliance. At present, this burden is estimated at $700 billion annually. Much of the cost is associated with recordkeeping and tax law enforcement, neither of which is reduced by a flat tax. A flat tax certainly involves a simpler tax return, but return preparation is the smallest component of tax law compliance.
The solution to our tax problem is to adopt a national retail sales tax in place of the personal and corporate income tax. Only a sales tax can eliminate the invasiveness of the IRS, since one's income and lifestyle are irrelevant."
Not to mention the even greater losses on the economy that result from depressed sales(deadweight losses) as a consequence of the systemic cost of the tax system prices much of which would be relieved by removing the more direct tax related business costs accounted for above.
http://www.heritage.org/Research/Taxes/hl565.cfm
An American Economic Review study found that every dollar of taxes could impose as much as $4 of lost output on the economy, with the probable harm ranging between $1.32 and $1.47
Edgar K. Browning, "On the Marginal Welfare Cost of Taxation," American Economic Review, Vol. 77, No. 1 (March 1987), pp. 11-23."Another study in the Journal of Political Economy estimated that the corporate income tax costs more in lost output than it raises for the government."
Jane G. Gravelle and Laurence J. Kotlikoff, "The Incidence and Efficiency Costs of Corporate Taxation When Corporate and Noncorporate Firms Produce the Same Good," Journal of Political Economy, Vol. 97, No. 4 (1989), pp. 749-780.
Chief Executive, The New directions in tax reform -
May 1995.Tax expert Ernest Christian Jr., a partner with Washington's Patton, Boggs & Blow, reckons these are low estimates or at best incomplete. Citing a U.S. Treasury study which indicates that 6 billion man-hours are consumed each year just in the record keeping for income and payroll tax returns alone, Christian says the true burden on the U.S. economy is probably closer to $1 trillion. For example, Jane Gravelle of the Congressional Research Service estimates that economic loss from the corporate income tax is equal to about 97 percent of the corporate tax revenue collected.
STATEMENT OF REPRESENTATIVE DICK ARMEY
HEARING ON THE IMPACT ON
INDIVIDUALS AND FAMILIES OF REPLACING THE FEDERAL INCOME TAX
Committee on Ways and Means, Full Committee, 4-15-97 Testimony
Hinders Economic Opportunity
According to a study by Jane Gravelle, an economist with the Congressional Research Service, and Larry Kotlikoff, an economist at Boston University, the corporate income tax costs the economy more in lost production than it raises in revenue for the Treasury. Dale Jorgenson, the chairman of the Economics Department at Harvard University, found that each extra dollar the government raises in revenue through the current system costs the economy $1.39.
Economic Burden of Taxation
William A. Niskanen
Presented October 2003
Friedman Conference
Federal Reserve Bank Dallas page 6.
www.dallasfed.org/news/research/2003/03ftc_niskanen.pdf"Given that the elasticity c implicit in recent U.S. fiscal conditions is about 0.8 and the average tax rate is about 0.3, the marginal cost of government spending and taxes in the United States may be about $2.75 per additional dollar of tax revenue. One wonders whether there are any government programs for which the marginal value is that high. Given the estimate of the long-term elasticity c from the U.S. time-series data, the marginal cost of government spending and taxes may be as high as $4.50 at the current average tax rate. "