Posted on 02/03/2005 9:54:12 AM PST by EternalVigilance
Can you give me the name of *ANY* economists who believe in the minority view of sales tax advocacy groups? ANY?
I can do better, and point out the results of their studies that make the short term as well as intermediate term effects very clearly.
http://www.economics.harvard.edu/faculty/jorgenson/papers/baker.pdf
|
Revised April 12, 1999. This paper was prepared for presentation at the 6. Figure 8 compares the impacts of the tax reforms on exports, while Figure 9 compares the impacts on imports. It is important to keep in mind that net foreign investment, the difference between exports and imports in nominal terms, is exogenous in our simulations, while the exchange rate is endogenous. The Flat Tax results in a very modest decline in exports of 0.5 percent in 1996, relative to the Base Case, but exports recover rapidly and exceed Base Case levels in 1997, rising eventually to 4.6 percent above these levels in 2020. Imports initially rise by 2.0 percent, relative to the Base Case, in 1996, but this impact declines to only 0.3 percent by 2020. The Sales Tax generates a substantial export boom; the level jumps to 29.2 percent about the Base Case level in 1996, but declines by 2020, reaching 18.9 percent of this level. Imports in 1996 exceed the Base Case level by 2.5 percent, but fall to 1.3 percent below this level in 2020. |
No economist I have ran into has denied short term effects on trade. They the merely say in the long term, trade will balance as a consequence of currency exchange rates adjusting encouraging additional foreign investment into the United States, which as I pointed out has additional benefits.
The economic burden (who actually bears the burden of the tax) is exactly the same between them. That is why they impact the economy in the same way and are considered "economic equivalents".
LOL, I notice you persist in leaving out the Overhead cost that business is exposed to as regards the different tax systems.
Ultimate incidence of consumption tax is not the issue, as economists hold all consumption taxes are held to be passed onto the consumer, regardless of legal incidence.
The issue is the differnences in overhead regulatory costs yield the tax revenue, that vary with the different implementations and the fact that those costs expand from the small set of retail businesses in the NRST case to a much broader set of businesses the VAT & Flat Taxes are imposed upon as well as the extensive regulatory environment created to support the latter two.
The administrative burden imposed on business is much greater for VAT & Flat Taxes and the legal costs of the Flat Tax in adjudicating controverisies over the re-definition of taxable income under the Flat Tax is clearly a problem as it is in the current income tax system:
Flat Tax as Seen by a Tax Preparer
by Vern Hoven
For the VAT's regulatory environment and implementation burdens CRS provides enlightment:
|
Congressional Research Service Brief: IB92069 A Value-Added Tax Contrasted With a National Sales Tax
|
Not to mention the experience to be recognised in the Euopean VAT implementations with their ever growing complexities driving the small businesses right out of the markets favoring large conglomerates that execute vertical mergers to remove the number of taxable transactions and can realize economies of scale not availble to the single proprietor, self employed or small business.
Dr. Dale Jorganson of Harvard. Not that that means anything. You can find an economist to say anything. Kinda like lawyers, historians, and psychologists.
Dr. Dale Jorganson of Harvard. Not that that means anything.
Even Jorgenson recognises that currency exchange rates move international trade balances over time as is apparent in his results and statements in other papers. No one denies that not even the Fair Tax people.
The issues are what are the short term and long term benefits that accrue the US and the American people overall. Not that the economics of currency markets can cause change with time, of course it does.
The nature of that change and what it portends for the US in both short term and long term is what is the issue.
The ultimate burden is the same, assuming equivalent activities. But under a consumption tax, the consumer (i.e., the ultimate taxpayer in either system) has more control over whether or not he actually pays tax. Apart from spending on bare necessities, he can sit on his money until he decides it's time to spend it. The government only gets his money when the conditions are such that he's willing to spend, which puts added incentive on government to keep taxes down.
Both the flat income tax and the sales tax are consumption taxes. I'm not sure what your point is.
Where the flat income tax is concerned its easy.
Reduce income to avoid the tax you have less to invest or spend.
With an NRST, reduce spending & invest the income, ultimately you have more income to invest and spend.
Reduce income to avoid the tax you have less to invest or spend.Why would you reduce your income? You could take that income and invest it and then you can consume your returns to savings tax free.
With an NRST, reduce spending & invest the income, ultimately you have more income to invest and spend.Reduce spending and invest under a flat tax and ultimately you have more income to invest and spend. Your savings are just not taxed at the time of consumption, like the sales tax. But still, it's the same effect under either.
You could take that income and invest it and then you can consume your returns to savings tax free.
You missed the point YN, under a Flat Income Tax, to aquire an investment in the first place, a wage earner has to pay tax first after which he might invest some of what is left over. Under an NRST there is no tax on wage, invest tax free or spend taxed are the choices.
Reduce spending and invest under a flat tax and ultimately you have more income to invest and spend.
Initial investment can only come out of after tax wages and earnings under the Flat Income Tax. Under NRST, investment comes out of gross untaxed earnings.
Your savings are just not taxed at the time of consumption, like the sales tax.
You have to pay tax on the earnings that go into the savings first under the Flat Income Tax. Thus there is a substantial increase in the earnings power of a wage dollar when invested under the NRST as that wage dollar is untaxed unless spent on consumption.
But still, it's the same effect under either.
Just not true. The earned dollars going to create the investment are not taxed. Under Flat Income Tax they are.
"So, since I have proven my position is the majority position (using a sales tax advocacy site!), your burden of proof is to name one (that's all, one) economist who shares your belief that a sales tax would be better for American competitiveness than a flat tax."
"I said the trade deficit would begin improving for two reasons: oil prices should begin declining in the spring and summer and oil is 40% of our imports; second, the falling dollar has increased the competitiveness of American producers and raised the price of imports. Both actions lead to improved trade flows over time. Neither of these issues has anything to do with the Fair tax.
However, that tax reform would tax imports that are sold as final goods here and not tax goods that flow abroad. Moreover, as the fair tax replaces other taxes, the cost of producing goods here will fall (before paying the tax). Because no tax is paid on exports, our goods automatically become more competitive. Thus, you are right in assuming that the Fair tax will help the value of the dollar and improve our trade deficit.
I hope that helps to answer your question."
Don Ratajczak
Dr. Ratajczak is Regents Professor Emeritus of economics at Georgia State University. He has taught economics at the university level for over 20 years and is probably the most respected economist in the southeast.
Any other questions?
"Both the flat income tax and the sales tax are consumption taxes."
Which flat tax proposal are you referring to? Certainly not the Burgess bill, which is the leading flat tax proposal in congress at the present time. Certainly not a generic flat tax, which is an INCOME tax, and not a consumption tax. Are you talking about some hybrid proposal in which you try to masquerade the flat tax as a consumption tax to take advantage of the benefits and growing understanding of those benefits on the part of the American people?
"Why would you reduce your income? You could take that income and invest it and then you can consume your returns to savings tax free."
What proposal are you referring to?
"Reduce spending and invest under a flat tax and ultimately you have more income to invest and spend. Your savings are just not taxed at the time of consumption, like the sales tax. But still, it's the same effect under either."
Can you point me to a website that lays out that proposal in a little more detail? That doesn't appear to describe any of the flat tax proposals that I am familiar with.
Certainly not a generic flat tax, which is an INCOME tax, and not a consumption tax.A flat tax is a consumption tax. You should know this.
What proposal are you referring to?The proposal to have a flat tax replace the income tax.
Can you point me to a website that lays out that proposal in a little more detail? That doesn't appear to describe any of the flat tax proposals that I am familiar with.Well you don't know that a flat tax is a consumption tax so maybe you should go and figure out that and come back later.
A flat tax is a consumption tax. You should know this.
The proposal to have a flat tax replace the income tax.
The description from the most popular flat tax proposal introduced to Congress, "The Freedom Flat Tax Act of 2003:"
H.R.1783
Title: To amend the Internal Revenue Code of 1986 to provide taxpayers a flat tax alternative to the current income tax system.
http://burgess.house.gov/News/DocumentSingle.aspx?DocumentID=6027
"The flat tax concept is easy - there are two components, the individual wage tax and the business tax. Individuals pay a flat rate on their wage and pension income, and business are taxed on their profits minus their wage and pension expenses - this ensures that income is only taxed one time. Capital gains, dividends, and interest are only taxed once, and they are taxed at the business level. Additionally, the flat tax repeals the Alternative Minimum Tax and the marriage penalty."
Hmmm, where does it say that income used to purchase stock or bonds investment not taxed or deductible(hint its not in the bill either)? And how can one even aquire an investment without first having paid a tax on wages or business income?
Claiming a tax system to be a "consumption tax" and it being a consumption tax are two very different things.
The NRST, a true consumption tax, does not tax income used to purchase an investment or the returns from investment at any level. Only income that is spent for consumption, rather than re-investmented or saved is taxed under a true consumption tax.
[The ignorance of the most fanatical FairTax supporters have for other plans never ceases to amaze.]
“No one should be judge in his own case. ”
-- Publilius Syrus (~100 BC)
re-investmented = strategerized on alternate Tuesdays ;O)
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.