Posted on 02/13/2005 10:41:05 AM PST by nsmart
I think the employee portion of the payroll taxes (and personal income tax) being eliminated will result in increased net wages, rather than decreased prices. However, the employer portion will result in decreased costs. Market pressure will determine if the decreased costs result in decreased prices rather than increased profits.
Regardless, to whatever extent the elimination of the existing taxes does NOT allow for reduction of prices by virtue of it being incedent on wages rather than costs, it INCREASE WAGES. Whether it INCREASES WAGES or DECREASES COSTS, it's going to do either one or the other. The only potential for decreasing purchasing power by the wage earner is to what degree the decrease in costs are turned into profit rather than reduced prices, which will still increase SOMEBODY'S buying power.
The net effect is that (if it is revenue neutral), then, overall, purchasing power on average should be the same. There would be some consumers who would be expected to have increased purchasing power, and some to lose some, but over all, it should net out.
However the fact that resident aliens (legal and illegal) and others not currently paying income tax will now pay sales tax should broaden the tax base. This will put those people in the position of having less purchasing power, and have a net benefit to the purchasing power of those who pay taxes, now.
It will almost have to reduce the price. Adding a 30% sales tax on goods, while perhaps decreasing costs 10% will put heavy pressure on prices. I can't imagine this plan being good for people on fixed incomes who will not have the added purchasing power from the eliminate Payroll Taxes, but will have to be faced with paying more for goods and services.
I think that is a valid point. However, I think 10% is a low estimate in my judgement, especially in the long run. But I would also like to point out the dynamics involved using your numbers as an example. Even if prices only come down 10%, a $10 item would be priced at $9. Adding 29.87% tax would yield a total cost of $11.69 including the tax.
If your estimate is low, and prices were reduced by 15%, the $8.50 item plus the 29.87% tax would yield $11.04.
Keep in mind they will also receive the credit to compensate for 23% of their purchases up to the poverty level. Also consider how the benefits are calculated. If the cost of living goes up, then the benefits should rise as well.
Is anyone considering the boon to business with all the corporate headquarters moving back to the US. With the US becoming a tax haven for the rich mucky-mucks... the economy will grow by leaps and bounds. Once that happens, the % of tax can be dropped.
Perfect example of how the economy REALLY works.
. Once that happens, the % of tax can be dropped.
Presuming the Bush Administration is successful in making its tax cuts permanent, the % of tax can be dropped right of the bat. One of the rules of the game laid down by Bush is revenue neutrality.
The Fair TaxAct 23% figure for tax inclusive rate was set for revenue neutrality under the Clinton tax law. Revenue neutrality under current revenue collections targets a somewhat lower NRST rate as indicated by Tax Foundation's measures of effective federal tax rates as a percentage of Net National Product.
refer Tax Freedom Day 2004 PDF http://www.taxfoundation.org/sr129.pdf
|
Total Effective Tax Rates by Level of Government |
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| Year | Federal | State | Total |
| 1997 | 21.8% | 10.3% | 32.1% |
| 1998 | 22.4% | 10.4% | 32.8% |
| 1999 | 22.5% | 10.4% | 32.9% |
| 20000 | 23.1% | 10.4% | 33.5% |
| 2001 | 22.2% | 10.5% | 32.7% |
| 2002 1 | 19.7% | 10.2% | 29.2% |
| 2003 2 | 18.5% | 10.1% | 28.6% |
| 2004 3 | 17.9% | 10.0% | 27.9% |
| Notes: Leap day is omitted to make dates comparable over time. Since depreciation is not available to pay taxes, GDP is an overstatement of spendable income for the purpose of measuring tax burdens. Depreciation is netted out of NNP. 0 Last year of Clinton administration when the HR25(Fair Tax Act) rate was estimated 1 Economic Growth and Tax Reform Reconciliation Act of 2001 Sources: Office of Management and Budget; Internal Revenue Service; Congressional Research Service; National Bureau of Economic Research; Treasury Department; and Tax Foundation calculations. |
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I must stand correct. If ancient_geezer's table in post 626 is to be believe, states will have to add 10% inclusive to the 23% federal tax to get their current level of revenue. That's a 33% inclusive rate, or a 50% sales tax rate. My 35% guess was way too low. Imagine a 50% tax on every purchase! These guys can't be serious.
"Do you think a government can pay a tax?"
Given that they do now, I would say that the answer is a definite yes.
"Not if they aren't made here....which most aren't."
Correct. We have a trade deficit which is now up to $600 billion/year and continuing to grow. The FairTax would reverse that trend.
Given that they do now, I would say that the answer is a definite yes.So you think a government actually pays the tax. Just where do they get the money to pay this tax?
"What is proposed, a quarter of one percent? I am not sure too many states will sign on for that."
And if the rate were to be increased, you and YN and LL would be critical of that because it would cause the tax rate to go up.
"I can't imagine this plan being good for people on fixed incomes who will not have the added purchasing power from the eliminate Payroll Taxes, but will have to be faced with paying more for goods and services."
There is a lot about the FairTax that you can't envision, based on your posting history. People living on fixed incomes are, for the most part living on low incomes. Regardless of what the sales tax rate turns out to be, all their sales taxes up to the poverty level would be tax-free due to the rebate. That means if prices ONLY decline by 10%, then they would see a 10% increase in their purchasing power up to the poverty level. That sure seems like a benefit to me.
Of course, we will leave alone for now the debate over the magnitude of the price decline. Dr. Jorgenson says 22%, AR says 10%.
Our current system is an embarrassment. I don't understand why we go through so much silliness in order just to fund our government. A simple NRST would be far better.
I personally don't like some provisions of the Fair Tax proposal -- the prebate (which reminds me of McGovern's "negative income tax") particularly doesn't do much for me. It's a major flow of money back that if we didn't do, we could lower the rate from 23% down to something more reasonable; my quick back-of-the-envelope comes to something under 20%. Every point off that 23% will bring more supporters, also; not having the "negative income tax" aspect would help with more conservatives (although, to balance that, it probably has a powerful attraction for the left.)
But if the Fair Tax is our NRST proposal, I will go along with it. It certainly is far better than our current tax regime.
I personally don't like some provisions of the Fair Tax proposal -- the prebate (which reminds me of McGovern's "negative income tax") particularly doesn't do much for me.
Unfortunately there are issues that must be addressed to make any tax bill politically viable. When it is a choice between DOA and the potential for enactment, I'll take the later. Especially as the alternative of piecemeal exception of goods and services picked by pandering politicians would be a total disaster.
100% agreed. A simple, uniform NRST in any form is far better than our current embarrassment.
People that wait for perfect solutions generally get to do a lot of waiting. In this case, I will be glad to see the Fair Tax enacted as it is written in H.R. 25, even if I personally would have liked to see some details done differently.
I'm curious where you're getting your 10% figure for states. I would expect it would be higher.
But I'd like to point out that unless the rate is higher than it needs to be for revenue neutrality, we're paying that much tax now and just don't realize it. Better to make it visible so people understand how much money governments waste. The hidden taxes have allowed the socialists to suck vast amounts of wealth from our nation and move it back into the hands of those who will support their agendas.
Only if it reduces employee compensation(s)...Your bosses there at AFT say it won't.
If that's such a good idea,why don't you raise the "rebate" to a level the middle class are untaxed too?...imagine what that would do to the economy.
The truth is the "rebate" is a huge transfer of wealth (at least 19%) tax increase and NOT a windfall for the poor from a money tree...
Of course, we will leave alone for now the debate over the magnitude of the price decline. Dr. Jorgenson says 22%, AR says 10%.
What is AR?
The fairtax rate is tied to the GDP. a 22% drop in GDP would only mean a tax increase...and they wouldn't even have to vote for it. They've already authorized the bureaucrats at Social Security to do that on their own, as they see fit.
What a fraud, that's another clever lie.
That table has nothing whatsoever to do with, nor does it "indicate" any national sale tax rates.
Your bosses at AFT determined the sales tax rates by determining how much was needed to replace the proposed repealed taxes as a percentage of GDP...not "by Tax Foundation's measures of effective federal tax rates".
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