Changing the wages of Company A does not create greater demand for A's product.
This is one point we differ I do not see adding 30% on to the price of the products through the FT LOWERING prices just the opposite.
While I would love to believe that wages are going to rise and prices fall I can't fit it into any economic model with which I am familiar. This scenario is never going to be acceptable to the Class Warriors since it would mean excess profits as the companies would be gaining the SS taxes generally paid for workers at first cut. Capacity utilization rates will be crucial in determining the direction the economy would go. Given an unemployment rate as low as it is should profit increases stimulate more hiring inflationary pressures will be greatly increased. I can't see taking such a step as FT without great cautions being exercised the wrong step could be disastrous.
Changing the wages of Company A does not create greater demand for A's product.
Why not? I once worked for a major electronics company. With a raise in wage, I was able to release more of my income to pleasure rather necessity first and purchase more of my Companies products.
When my wage was lower, my priorities had to lay with more mundane purchases. My demand for my company's products rose with capacity to purchase them.
Economically, demand is more than mere want, it must result in sales in order to affect supply/demand equilibrium with price.
However in saying that, the issue is not the specific products of one's own company where the effect of changes in taxation are concerned. We are discussing a macro factor and its effect on consumption as a whole and upon product demand as a whole in relation to wages and prices. It does not matter that you purchase your company's goods or services others do, and as their wages rise their demand for Company A products rise with their capacity to purchase them, while at the same time an increase in your wage you find you are more inclined to purchase B or C's products. The effect on aggregate demand and supply equilibrium is the issue.
This is one point we differ I do not see adding 30% on to the price of the products through the FT LOWERING prices just the opposite.
The reason price can lower is because business costs are lower. Demand rises for those goods relative to one's ability to purchase them.
If your wage is unchanged, (lower costs on business certainly do not cause lower wages) then you are able to purchase more than you would otherwise. Remember the total tax revenue collected out of the economy remains the same, it is savings in overhead costs (above and beyond the relief of taxes on businesses) that leads to greater purchasing power overall through greater efficiencies achieved in production of goods and services.
While I would love to believe that wages are going to rise and prices fall I can't fit it into any economic model with which I am familiar.
Ever hear of consumer electronics? Increase in productivity initiates precisely that mode of action. The key is in recognizing that when any product can be produced more efficiently (i.e. at lower cost) prices in a competitive market can lower and profits/wages can rise with increased market volumes. But even if a wages paid are held constant in a rising productivity scenario (as is the generally happens in the short term) the consumer's ability to purchase products, hence demand increases for products to meeting the increased supply that is made available through rising productivity.
This scenario is never going to be acceptable to the Class Warriors since it would mean excess profits as the companies would be gaining the SS taxes generally paid for workers at first cut.
What excess profits? Competition for market share drives price down, competitors across the board realize savings of reduced overhead when income and payroll taxes are repealed. Those companies that can successfully lower there prices will force the rest to do likewise. For any that don't follow suit will see what profit they had wither away for lack of demand as customers go to their competitors offering product at the lower price.
I can't see taking such a step as FT without great cautions being exercised the wrong step could be disastrous.
What's the worst that can happen? Wages go up, and prices remain constant, still a net gain because not only are taxes repealed on business, overhead costs go down allowing that increase in gross wages paid you that you figure must happen out of the Class warfare scenario. The net result is still an increase in purchasing power of wage earners at of the amount of overhead savings realized, that are translated into wage increases. Once again demand rises, due to more efficient production of goods and services. The the economy grows while the same level of revenues are taken out for government.
The issue in the resolution of any scenario is the fact that not only are taxes per-se removed from producers, tax related overhead is removed as well. It is the latter that assures increased purchasing power of households and economic growth sufficient to preserve the same level of revenues to government.
Now if we can break all the rules and throw out the revenue neutrality convention, and lower NRST rates such as to create real tax cuts, as consumers and citizen we are even better off by the amount of tax relief of the cuts.
The problem remaining as to how to constrain government's propensity to spend in the tax cut case. That requires a change in attitudes of the electorate as to the value of more government. Therein is one of the strong reasons for moving to a totally visible tax system, fewer voters end up believing that government is a tooth fairy, when the see the impact in direct terms when tax is extracted from them with every purchase they make.
Perception of cost of government on a person basis through the entire electorate is a necessity if we are ever to break the paradigm driving ever higher government
Get the tax collection mechanism separated from the individual citizen, but assure they all perceive the burden that largess and excess government imposes in their daily lives. Only then can the electorate be said to have the opportunity to knowingly, intelligently and responsibly exercise their franchise to vote. And only then will and opportunity exist to force a reduction in government.
Uh oh! Somebody ought to call Henry Ford and splain this to him! LOL!