There is a dispute on this thread about the compliance costs.
What are they in reality?
If not 30 percent, then the original post would not be accurate.
Under the NRST, accountants and bookkeepers will still do everything they do now. They will still track all costs, accounts payable, accounts receivable, payroll, overhead, net profits, and fill out a few tax forms here and there.
In particular, they will still track and report wages to the SSA. They will not fill out federal (wage) tax forms once per month (or quarter) but instead they will fill out sales tax forms once (or more) per month.
You tell me, where are the compliance savings here?
There is a dispute on this thread about the compliance costs.
What are they in reality?
If not 30 percent, then the original post would not be accurate.
"Compliance Costs", as they are generally perceived, are not the dominant reason for reductions in the price producers receive for products(amount consumer pays less taxes) under the NRST.
The reduction of 20 - 30% overtime in producer prices has several components to it, compliance (i.e. accounting and reporting) costs being the smallest factor burdening businesses.
| http://www.taxfoundation.org/compliance2002.html |
Overhead Compliance CostsThe 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 CostsAs 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. |
The total overhead costs have been estimated to be about 6-10 times higher than just the familiar "compliance cost" figures generally quoted in many tax articles.
For example the more comprehensive amount 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."
would indicate an "overhead cost" of 60-70 cents for each dollar of revenue collected by govenment.
While the combined overhead and opportunity costs are seen by many studies to be more than all the tax revenues received by government by a large factor:
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. "
Other estimates in the past have similarly ranged depending on the comprehensiveness of the study data series from which the estimates have been derived:
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.
All taken in total, the burdens on trade and business in the economy are tremendous and not in all ways obvious. On the whole moving to an NRST where business is not burdened with the payment federal taxes removes significant costs as well as allows for significant expansion in productivity.
All taken together provide the potential for the average shelf price of goods and services at retail level to fall around 20% in the first year and lower with time as the effects of increased capital investments in business infrastructure perculate through the economy.
What are they in reality?
If not 30 percent, then the original post would not be accurate.
The compliance cost isn't 30%, the cost of taxes and complying with the tax code is 30%. Plus or minus a little.