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To: Principled

Show me where Dale Jorgenson said pre-tax.


98 posted on 02/13/2005 3:13:50 PM PST by Always Right
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To: Always Right
Easy big guy... take a deep breath...

My problem with what you said is that you said it was claimed that prices would drop 30-40%. I said no, they will drop 20-30%.

Then you freaked out.

100 posted on 02/13/2005 3:18:31 PM PST by Principled
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To: Always Right; Principled; Bigun; Conservative Goddess; phil_will1

Show me where Dale Jorgenson said pre-tax.

He said the price received by producers and for investment goods(capital assets) will fall 20-30%.

Of course it helps to know the definition in an equilibrium model that economists are speaking about when discussing "producer price"; that it is the consumer price discounted for taxes and subsidies. Producer price is the price received by the supplier (i.e. for the market considered) sans tax and subsidies as opposed to the total amount including tax and subsidies that is actually paid by the consumer to purchase a product.

 

Algebraic Solution of Linear Supply and Demand Models
R. Wigle
Director Masters Program in Business Economics
Wilfrid Laurier University
May 9, 2001

http://info.wlu.ca/~wwwsbe/faculty/rwigle/ec238/ref/pe-algebra.pdf

1 Market Equilibrium

In a market equilibrium with no taxes or subsidies, two things are true. First the producer price is the same as the consumer price, and the quantities supplied and demanded are the same. ***

2 Taxes and Subsidies

Now suppose that instead of the market equilibrium we are looking at a case with a tax or subsidy. In these cases, we can again solve for an equilibrium. In this case things are a bit trickier. ***

2.1 Tax

When a tax is present, there is a difference between the price the consumer pays and the price that the producer receives. In simple terms, the consumer pays the producer price plus the tax. ***

2.2 Subsidy

When a subsidy is present, there is once a again a difference between the price the consumer pays and the price that the producer receives. In this case the producer gets what the consumer pays plus the subsidy. ***

NRST is not paid by producers on their purchases for business purposes and all federal income and payroll taxes on business are repealed.

 

According to Jorgenson, including the NRST, from the consumer's perspective, the price of consumption falls 3-10% over the time frame of the study.

 

http://www.economics.harvard.edu/faculty/jorgenson/papers/baker.pdf

Revised April 12, 1999.
THE ECONOMIC IMPACT OF FUNDAMENTAL TAX REFORM
by
Dale W. Jorgenson Harvard University
and
Peter J. Wilcoxen University of Texas, Austin

This paper was prepared for presentation at the
Baker Institute Conference
on Tax Policy Reform
Rice University Houston,
Texas November 6, 1998


 

7. The inter-temporal price system provides the mechanism for re-allocations of resources in our simulations. Figures 10 and 11 give the impacts of the tax reforms on the prices of investment goods and consumption goods and services. Under the Flat Tax the price of investment goods drops by more that 6.8 per cent in 1996 and the price decline continues, falling only modestly to a little over six percent by 2020. The Sales Tax produces a reduction in investment goods prices exceeding twenty percent in 1996, rising gradually to between twenty-five and thirty percent over the period 2000-2020. Under the Flat Tax prices of consumption goods and services decline by more that 4: 5 percent in 1996, but this price reduction falls over time to around three percent in 2020. The Sales Tax reduces the price of consumption by a little over three percent in 1996, but this price decline increases to more than ten percent by 2020.

9. Since producers would no longer pay taxes on profits or other forms of income from capital and workers would would no longer pay taxes on wages, prices received by producers under the Sales Tax, shown in Figure 13, would fall by an average of twenty percent in 1996. Figure 14 shows that prices received by producers would fall by an average of twenty-five percent by 2020. The impact of the Flat Tax on prices received by producers is much less dramatic. Prices decline in the range of six to eight percent for most industries in 1996 and five to seven percent by 2020.


210 posted on 02/14/2005 12:04:10 PM PST by ancient_geezer (Don't reform it, Replace it!!)
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