Instituting a flat tax benefits you

Why should the government care if a receipt was issued?

Good question. As I said previously, I believe it is to inhibit retailers from defrauding the feds. If the retailer prints a receipt, he is likely to submit those same records (or use them as documentation) to support his claim of total sales revenue.

Of course there is the obvious answer as well, the legislation was not authored by the government.

Perhaps, just perhaps mind you, the bill's authors believed visibility of taxes extracted from the voters may actually lead to a change in how the electorare perceive an ever growing government.

However, there is always the mundane: Customers seem to like their receipts as regards any payments they make to busineses for their goodies. The provision mandating what's on that receipt just makes sure the customer gets a full accounting of not only the prices of his goodies, but the tax government extracts from the payment as well.

"It's like me in the restaurant: What do I care about extravagance if you're footing the bill?"
Walter Williams

From Brookings: • Extending the tax cuts will not reduce uncertainty. Instead, it would increase the long-term imbalance between spending and revenues and make even larger policy changes required.

These guys are so panicked about the prospect of tax cuts damaging their fragile US budget. Are they at all concerned that spending can also damage it? I think I'll make a personal vow: NEVER ALLOW A LIBERAL TO TALK ABOUT TAX CUTS CAUSING A DEFICIT WITHOUT MAKING HIM ADMIT THAT BUDGETS ARE A BALANCE OF REVENUE AND SPENDING.

They'll probably be crying themselves to sleep quite a bit after the FairTax becomes law.

They'll probably be crying themselves to sleep quite a bit after the FairTax becomes law.

We should start a betting pool:

"Pick the square and see if you have the correct date the next taxpayer-subsidized institution gets wind of the grass-roots support for the AFT and mounts a campaign against it."

They'll probably be crying themselves to sleep quite a bit after the FairTax becomes law.

Just curious, what chance do you give the FairTax to become law?

Very good I'd say - and certainly better than your Nightmare VAT/Nightmare Flat tax.

Very good I'd say

What's very good? 30%? 50%? 70%?

"Your problem is you are looking to deep into something the is plainly stated and you expect the worst from it."

Not necessarily the worst, but merely the unexpected. Those pushing the NRST are salesmen and I expect they would place their product in the best light. I'm just looking under the hood, so to speak.

As relates to what?? Idiotic question!!

Let's just say - far, FAR better than the Nightmare VAT/Nightmare Flat tax ... which you'd rate at WHAT %???

Just curious, what chance do you give the FairTax to become law?

If I may, 50/50. The VAT: 00000. The so-called "flat tax" 50/50. A major paperwork reduction act: 0000. There will be major change.

I'm just looking under the hood, so to speak.

Welcome. If you see a really good engine do you recommend to someone that they buy the car? There are about 600,000 of us salesmen ready willing and able to answer your questions about the fair tax. And, please, read Neal Boortz and John Linder's book when it comes out in the next 30 days or so.

What would you suppose a reduction in labor costs (rather than an increase) would do to the costs of goods and services across the board?

Workers wouldn't tolerate a pay cut. Especially not if faced with a large increase in sales tax. The likely path would be a freeze in wages. A pay cut would certainly put the screws to any hope of revenue neutrality.

Workers wouldn't tolerate a pay cut.

Of course they wouldn't. What indicates to you that they'd be looking at a paycut?

The reduction in labor costs of which I spoke is the reduction that corresponds to the elimination of the employer "contribution" payroll tax. That amount didn't ever go to the employee in his paycheck - it's just an amount the employer has to pay to the feds.

The employer will no longer have to pay that to the feds - and the employee still gets his contracted wage, of course. So it would be wrong to begin the thought process thinking a paycut would be in order.

That said, there will be a reduction in labor costs to employers. My question was if you believe (as we all do) that an increase in labor costs leads to an increase in prices, how do you think a decrease in labor costs would affect prices?

Since you insist on creating your list of horrors on "consumption taxes" and wages.

Seems we should address some misconceptions that each of your excerpts raise and encourage folks to actually read the full material that your quotes are taken from.

In turn, we start with your Kotlikoff footnote, and what the Kotlikoff paper as a whole had to say about taxation and tax reform, and specifically the Fair Tax as Kotlikoff felt in 2000 under Clinton/Gore adminstration looking ahead at growth of government and higher taxation in response.

"Assuming" the ever higher burdens of ever growing government and higher tax rates, there is no doubt anyone would also "assume" much the same as the FOOTNOTE you chose to focus on:

Statement of Laurence J. Kotlikoff,

Professor of Economics, Boston University, and Research Associate, National Bureau of Economic Research
Testimony Before the House Committee on Ways and Means - Hearing on Fundamental Tax Reform
April 11, 2000

1. The lifetime net tax rate is defined as the present value (to birth) of taxes paid over the lifetime net of the present value (to birth) of transfer payments received over the lifetime divided by the present value (to birth) of lifetime labor income.
2. This sentence and the one preceding it assume the price level will rise with the adoption of the Fair Tax. If the Federal Reserve used its monetary policy to maintain the consumer price level, the adoption of the Fair Tax would entail a decline in the level of producer prices and, thus, the nominal wages and capital income received by productive factors. Under this scenario, government transfers, if they weren't reduced in nominal terms, would end up maintaining their purchasing power, while factor payments would not. I.e., the same real redistribution toward the poor would arise.
3. See Kotlikoff, Laurence J., "Replacing the U.S. Federal Tax System with a Retail Sales Tax - Macroeconomic and Distributional Effects," mimeo, December 1996 and Altig, David, Alan J. Auerbach, Laurence J. Kotlikoff, Kent Smetters, and Jan Walliser, "Simulating Fundament Tax Reform," forthcoming, The American Economic Review, 2001.
4. Gokhale, Jagadeesh, Laurence J. Kotlikoff, and John Sablehaus, "Understanding the Postwar Decline in U.S. Saving: A Cohort Analysis," The Brookings Papers on Economic Activity, no. 1, 1996, 315-90.

Interestingly, one may wonder where wage decreases arise from when business income and payroll taxes are repealed and heavy tax related overhead costs on business decline allowing for lowering of producer prices without impacting wages at all.

Somehow expecting the Fed to act in a way to reduce folks wages seems to be some what of a stretch especially seeing that much of the NRST tax impact will be reduced by the normal competition for market share optimizing business profits at lower producer(i.e. shelf, pre-tax) prices.

Statement of Laurence J. Kotlikoff,
http://waysandmeans.house.gov/legacy/fullcomm/106cong/4-11-00/4-11kotl.htm
Professor of Economics, Boston University, and Research Associate, National Bureau of Economic Research
Testimony Before the House Committee on Ways and Means - Hearing on Fundamental Tax Reform
April 11, 2000

"Consumption taxation is needed not just to help our children. It is also needed to simplify the tax code and reduce effective marginal tax rates. The Fair Tax proposal is a case in point. This proposed reform would eliminate both the personal and corporate federal income taxes as well as the payroll tax, and replace them with a federal retail sales tax plus a rebate based on each household's demographic characteristics."

"Compliance costs would be vastly lower under a retail sales tax. So would, it seems, enforcement costs. The reason is that a broad based sales tax, with no exemptions for housing or any other forms of consumption, would feature much lower effective marginal tax rates than those we now face and, therefore, much smaller incentives to evade taxation."

However, seeing your quote is a footnote afterall, it also behooves us to also look at what the footnote actually was in reference to:

Statement of Laurence J. Kotlikoff,
http://waysandmeans.house.gov/legacy/fullcomm/106cong/4-11-00/4-11kotl.htm
Professor of Economics, Boston University, and Research Associate, National Bureau of Economic Research
Testimony Before the House Committee on Ways and Means - Hearing on Fundamental Tax Reform
April 11, 2000

So if there were no system of taxation to begin with and we introduced a consumption tax, someone with twice the level of lifetime resources as someone else would pay twice the amount of tax. But we aren't starting from scratch. Instead, we are starting from a tax system with some very progressive and some very regressive elements. When measured relative to lifetime resources, the personal income tax is highly progressive, while the payroll tax is highly regressive. And the corporate income tax is essentially proportional to lifetime income since it reduces the net returns to all households no matter the size of their lifetime resources. The fact that the current tax system is not strongly progressive and may even be regressive is the reason that moving from the current system to the Fair Tax, with its progressive rebate, could end up raising the overall degree of tax progressivity.
The lifetime resource perspective leads naturally to comparisons of tax burdens within a cohort, since the lifetime resources of the young and old will be quite different simply because of their ages. Among the elderly, the Fair Tax would be particularly progressive because a federal sales tax would lower the purchasing power of the rich elderly who live off their assets, but not the poor elderly, whose primary means of support - Social Security benefits - would be automatically raised in response to a sales-tax induced increase in the price level. Hence, the Fair Tax features not just a demographic rebate, but also, implicitly, a rise in Social Security benefits. If government transfers to the poor young were also effectively indexed to the price level, the adoption of the Fair Tax would also trigger a rise in those transfer payments as well.⁽²⁾

Really a very interesting paper, and interesting points. Everyone should read it in its entirety for its insights not only of the Fair Tax legislation but on Flat Tax and VATs as well which pass business overhead costs and taxes through shelf prices onto the consumer though much less transparent mechanisms to voters and consumers.

Statement of Laurence J. Kotlikoff,
http://waysandmeans.house.gov/legacy/fullcomm/106cong/4-11-00/4-11kotl.htm
Professor of Economics, Boston University, and Research Associate, National Bureau of Economic Research
Testimony Before the House Committee on Ways and Means - Hearing on Fundamental Tax Reform
April 11, 2000

What does tax reform have to do with addressing the generational imbalance in U.S. fiscal policy? Essentially everything. To see this, let's start with what a tax reform would tax. Since the federal government is currently taxing wages and capital income, the only meaningful reform would involve taxing consumption on a comprehensive basis (as opposed to levying, as it currently does, a few excise taxes). And each of the major tax reform proposals advanced in recent years does precisely that.
The retail sales tax clearly taxes consumption. But so does the Flat Tax. Just ask Robert Hall, one of the originators of the proposal, who describes his Flat Tax as, effectively, a Value Added Tax. A value added tax taxes output less investment (because firms get to deduct their investment.) Now investment equals saving, so taxing output minus investment is taxing output minus saving, which is taxing consumption, since output minus saving equals consumption.
The Flat Tax differs from a VAT in only two respects. First, it asks workers, rather than firm managers, to mail in the check for the tax payment on that portion of output paid to them as wages. Second, it provides a subsidy to workers with low wages. The first difference is one of form, not substance. The second is more important, but doesn't negate the basic fact that the Flat Tax taxes consumption.
So what does taxing consumption have to do with achieving a generationally equitable fiscal policy? Again, essentially everything. The reason is that the current elderly as well as the baby boomers, who will shortly retire, have one primary economic activity left to accomplish - consumption. And under a consumption tax, they will pay a lot more in future taxes than they would under the current tax system. Although the elderly as a group would share in the burden of a consumption tax, the poor elderly - those living exclusively on Social Security benefits - would not because their benefits are indexed to the consumer price level and are thus guaranteed in real terms.
To recapitulate, given the likely path of government spending and the inevitable aging of our society, our children and our children's children are in for extremely rough sledding. Indeed, the CBO-FED study suggests they will face lifetime net tax rates⁽¹⁾ that are 80 percent higher than those we face if nothing is done. This generational imbalance, rather than the treatment of the rich versus the poor within a generation, is the fundamental issue of economic justice facing us today. Consumption taxation can address that issue by asking the current and near-term elderly to do their fair share in helping to achieve generational balance.

One should be keeping in mind FairTax legislation in HR25 actually proposes a maximum marginal tax inclusive rate(i.e. included in payment) of 23%, (30% tax-exclusive, i.e. added to price) on consumption, repealing all personal and business income, payroll and gift/estate taxes and is revenue neutral with respect to tax law it replaces, not upon a scenario of tax law that does not exist.

Furthermore, it should be noted, as of April 2005, under current economic conditions and tax law, Kotlikoff fully endorses the FairTax legislation of HR25 as written.

It is, However, of interest to review Kotlikoff's 2000 testimony in light of conditions as seen from the end of the Clinton Administration with its tax hikes and projected spending increases, where Kotlikoff points out and "assumes" many things regarding tax rates and tax reforms under the Clinton era conditions:

Statement of Laurence J. Kotlikoff,
http://waysandmeans.house.gov/legacy/fullcomm/106cong/4-11-00/4-11kotl.htm
Professor of Economics, Boston University, and Research Associate, National Bureau of Economic Research
Testimony Before the House Committee on Ways and Means - Hearing on Fundamental Tax Reform
April 11, 2000

"Consumption taxation is needed not just to help our children. It is also needed to simplify the tax code and reduce effective marginal tax rates. The Fair Tax proposal is a case in point. This proposed reform would eliminate both the personal and corporate federal income taxes as well as the payroll tax, and replace them with a federal retail sales tax plus a rebate based on each household's demographic characteristics."

"Compliance costs would be vastly lower under a retail sales tax. So would, it seems, enforcement costs. The reason is that a broad based sales tax, with no exemptions for housing or any other forms of consumption, would feature much lower effective marginal tax rates than those we now face and, therefore, much smaller incentives to evade taxation."

"The lower effective marginal tax rates under the Fair Tax would also mean much smaller economic distortions than currently exists. This reflects the proposition, which is well known to economists, that the welfare costs of distorting economic incentives rises with the square of effective marginal tax rates."

"The 25 percent or greater requisite tax hike is derived under the assumption that growth in federal purchases of goods and services keeps pace with growth in the overall economy."

In contrast to the limited empirical analysis of consumption taxation that has been conducted to date, consumption taxation has been studied extensively with large-scale life-cycle simulation models. My own research and that with Alan Auerbach, Cleveland Fed David Altig, Kent Smetters, and Jan Walliser indicates that the Fair Tax would raise the economy's living standard over the long term by roughly 15 percent.⁽³⁾ This long-run increase in output is generated by a major long-run increase in capital formation and a modest increase in labor supply.

"As described in Gokhale, Kotlikoff, and Sablehaus (1996), essentially all of the decline in the rate of U.S. saving in the postwar period can be traced to the government's five-decade long policy of taking ever larger sums from the young and giving them to the old.⁽⁴⁾ This intergenerational redistribution, carried out primarily through Social Security, Medicare, and Medicaid, has led to a dramatic rise in the absolute and relative consumption of the elderly. Since 1960, for example, the elderly's share of economy-wide consumption has increased more than four times fast than has their share of the population. Typical 70-year olds are now consuming roughly twice the amounts consumed by typical 30-year olds. In 1960, by contrast, 70-year olds consumed less than three quarters of the amounts consumed by 30 year olds."

"Simulation analysis and a variety of empirical calculations suggest that the retail sales tax rate needed for revenue neutrality under the Fair Tax, assuming no decline in the real value of government purchases, would be roughly 30 percent when measured on a tax-inclusive basis. This tax rate could be expected to decline by 3 or so percentage points over time as the economy expands."

"A tax-inclusive consumption tax rate of 30 percent translates into a tax-exclusive consumption tax rate of 43 percent. While the 43 percent rate sounds very high, proper comparison of the Fair Tax tax rate with the current payroll and income tax rates requires evaluating the consumption tax rate on a tax-inclusive basis. Even a 30 percent tax rate may sound like a high rate. But one needs to bear in mind that middle and upper income households in America are typically in combined income tax and payroll tax marginal tax brackets of 40 percent or more and that low income Americans are typically in even higher tax brackets once one considers the phase out of the earned income tax credit. Hence, given the state of U.S. marginal taxation, 30 percent is a low number."

"In shifting to a consumption tax, the U.S. would shift more of the tax burden onto the current middle class and rich elderly and partly reverse the postwar process of taking from the young and giving to the old. In addition to depressing national consumption and raising national saving, the switch to consumption taxation would, as indicated above, ameliorate our grievous imbalance in generational policy."

"The simulation studies also show substantial long-run welfare gains for all lifetime income classes from switching to consumption taxation. Indeed, under the Fair Tax, the initial upper income elderly are the only ones to suffer welfare losses during the transition."

However at bottomline, visible consumption taxes prescribe a limit on government growth, through the natural limits set by voters/consumers as they evaluate the cost of government against value received.

Only a retail sales tax assures visibility of the cost of government in a proportionate personal way in comparison to the benefit one receives through his consumption, instead of tax on the contribution one makes through productive efforts as measured by income whether such be in wages received or earnings from property at risk.

That said, there will be a reduction in labor costs to employers. My question was if you believe (as we all do) that an increase in labor costs leads to an increase in prices, how do you think a decrease in labor costs would affect prices?

The current behavior is to take a decrease in costs as bottom line profit while holding prices at a prevailing market price. Prices will only drop if parties with decreased labor costs try to gain market share with lower retail price. Walmart already does this, but they accomplish it by squeezing their vendors for lower prices and commiting to larger purchases in exchange. Big corporations selecting outsourced foreign labor are not passing on savings as lower prices. Most are doing it just because their competitors are following that model.

Prices will only drop if parties with decreased labor costs try to gain market share with lower retail price.

Where there is a 20-30% advantage for any competitor to cash in on market share over laggards, you figure they aren't going to?

Here is a table compiled from Dale Jorgenson's US Business sector estimates of change in production and price received by producers for Fair Tax implementation as percentage of 1996/97 tax law baseline case. He uses an IGEM simulation solving equilibrium price for optimum business profits in balance with a set of intergenerational household consumers seeking maximum value for total expenditure, a copy of the study can be aquired from AFFT by email, just request :

THE ECONOMIC IMPACT OF THE
NATIONAL RETAIL SALES TAX
By
Dale W.Jorgenson
May 18, 1997
Final Report to Americans For Fair Taxation

In the third the final column I computed the net price,(with a 23% NRST) paid for consumption by an assumed "retail" customer for each business sector via:

Price_(consumer)% = 100*((1-Price_(producer))/(1-Rate_(nrst)) - 1)

and present the change in NRST inclusive price to a final consumer in the last column of the table.

Presuming sector goods or service are sold to a final consumer for each sector the net change to consumer is represented in the last (shaded) column. Those shaded red represent net price increases (NRST inclusive) to the consumer.

I would submit that those NRST inclusive consumer price changes are within ±5 percentage points of the actual values that can be expected.

First Year 1996 Percentage Changes from Base Line Case For Fair Tax Implementation
Business Sector	% Change Production Quantity	% Change in Producer Prices	% Change in Consumer Prices
Agriculture	22.8%	-22.26%	+0.96%
Metal Mining	31.96%	-22.51%	+0.64%
Coal Mining	13.77%	-24.63%	-2.21%
Crude Oil	5.10%	-13.25%	+12.66%
Other Mining	34.99%	-23.50%	-0.65%
Construction	55.28%	-24.48%	-1.92%
Food Products	20.79%	-22.84%	+0.21%
Tobbacco	34.00%	-25.14%	-2.28%
Textiles	32.58%	-23.21%	+0.27%
Apparel	17.89%	-19.19%	+4.95%
Lumber, Wood	53.14%	-22.51%	+0.64%
Furniture	73.63%	-22.36%	+0.83%
Paper	28.13%	-22.81%	+0.25%
Printing	15.22%	-24.91%	-2.48%
Chemicals	33.91%	-21.83%	+1.5%
Refining	6.22%	-16.05%	+9.03%
Rubber, Plastic	49.96%	-22.66%	+0.44%
Leather	24.13%	-15.25%	+10.06%
Glass, Inc.	48.25%	-22.63%	+0.48%
Primary Metals	38.62%	-20.72%	+2.96%
Fabricated Metals	47.29%	-23.20%	-0.26%
Non-electric Machine	55.86%	-22.26%	+0.96%
Electric Machinery	55.25%	-21.04%	+2.54%
Motor Vehicles	60.82%	-18.53%	+5.81%
Other Transportation	16.90%	-23.80%	-1.04%
Instruments	24.51%	-22.89%	+1.00%
Miscellaneous Manufacturing	57.57%	-17.95%	+1.07%
Transportation	17.71%	-24.45%	-1.88%
Communication	14.79%	-25.30%	-2.99%
Electric Utilities	-9.05%	-23.51%	-0.66%
Gas Utilities	-8.29%	-20.03%	+3.86%
Trade	28.87%	-25.43%	-3.16%
Finance, etc.	16.93%	-24.87%	-2.42%
Other Services	12.04%	-25.43%	-3.16%
Government Enterprises	18.56%	-25.57%	-3.34%

Too bad you left alot out of Mastromarco & Burton's description of William Gale's prespective concerning Consumer Pricing.

This little bitty extract of yours leaves so much real information out of the picture, it is a shame you didn't include it all so folks could understand more clearly the caliber of argument that William Gale presents when he represents Brooking's and its Agenda for the Nation.

Response to William Gale

by Dan Mastromarco and David Burton
[authors of the FairTax]
Memorandum, March 16, 1998
Federal income and payroll taxes either are or are not incorporated into the prices of goods and services. If they are embedded in prices, their removal will reduce prices. If they are not, then their removal will not reduce prices but instead returns to labor and capital will go up. If returns to labor go up, people will see their after-tax wages increase and asset values will increase since the present discounted value of the new, higher returns will be higher.
The replacement sales tax could be incident on the factors of production or it could be incident on consumers through higher prices. It cannot be both. If it is incident on the factors of production, then wages and the return to capital will fall but sales tax inclusive prices will not be any higher, on average, than they are today. If the sales tax is fully incident on consumers, then prices will increase by the amount of the sales tax but returns to labor and capital will be higher.

However, your oversight is easily remedied with a full view of the section in question:

Response to William Gale
http://www.fairtaxvolunteer.org/smart/GaleRebuttal.pdf

by Dan Mastromarco and David Burton
[authors of the FairTax]
Memorandum, March 16, 1998

J. Gail Perspective: Consumer Pricing: Up, Down and Sideways Simultaneously

Gale: There “is little dispute that monetary policy would determine the price level” but income taxes are “clearly incorporated in the price of goods that are bought and sold” except that “it is not at all obvious that removing the income tax would reduce the price level.” Moreover, although “it seems plausible on theoretical grounds that an added sales tax would eventually get passed forward to consumers via higher prices” (Policy Paper 2/17/98, Page 33) asset prices would fall because returns fall (i.e. the tax was pushed back because prices fell) (Policy Paper, 2/17/98, page 36).

Gale’s analysis of the impact on prices and assets levels is contradictory and confused. He is right, however, that the analysis of the impact on prices, nominal wages, and asset prices should be divided into two questions: (1) the impact of the repeal of the income and payroll tax and (2) the impacts of the replacement sales tax.
Throughout his analysis Gale asserts inconsistent opinions on the impact of both repealing the existing tax system and of replacing it with a sales tax. He states that income taxes are “clearly incorporated in the price of goods that are bought and sold.” This means that when they are repealed, producer prices will come down as research conducted by Harvard’s Dale Jorgenson suggests. Jorgenson finds that repealing the income and payroll tax would reduce producer prices by 20-35 percent depending on the industry.
Gale, however, then rejects the view that income taxes are in the price of goods we buy and assumes that removing them will not reduce prices. He can not hold both points of view simultaneously. Federal income and payroll taxes either are or are not incorporated into the prices of goods and services. If they are embedded in prices, their removal will reduce prices. If they are not, then their removal will not reduce prices but instead returns to labor and capital will go up. If returns to labor go up, people will see their after-tax wages increase and asset values will increase since the present discounted value of the new, higher returns will be higher.
The replacement sales tax could be incident on the factors of production or it could be incident on consumers through higher prices. It cannot be both. If it is incident on the factors of production, then wages and the return to capital will fall but sales tax inclusive prices will not be any higher, on average, than they are today. If the sales tax is fully incident on consumers, then prices will increase by the amount of the sales tax but returns to labor and capital will be higher.
Monetary policy, of course, will affect prices. Other things being held constant, an increase in the money supply will, after distortions caused by it introduction into the economy, increase prices since “more money is chasing the same amount of goods.” Of course, all other things are not equal. Gale fails to express his opinion about whether the change from an income tax to a sales tax warrants a monetary expansion (accommodation) or not and why.

That of course is a fair analysis of William G. Gale's inconsistancies in analyzing the impact of the repeal of income and payroll taxes replacing them with an NRST.

In that, the piece unfortunately misses one additional point, as to why we can see a net gain in the purchasing power of out of our earned dollars as business becomes more productive and efficient with the repeal of business side of income and payroll taxes. A point that Kotlikoff, whom viewed earlier brings out clearly.

It's not just about the tax that is repealed, but the decline of related overhead costs as well that are the initiators of lower producer prices as well as final cost to the consumer including the NRST.

Statement of Laurence J. Kotlikoff,
http://waysandmeans.house.gov/legacy/fullcomm/106cong/4-11-00/4-11kotl.htm
Professor of Economics, Boston University, and Research Associate, National Bureau of Economic Research
Testimony Before the House Committee on Ways and Means - Hearing on Fundamental Tax Reform
April 11, 2000

"Consumption taxation is needed not just to help our children. It is also needed to simplify the tax code and reduce effective marginal tax rates. The Fair Tax proposal is a case in point. This proposed reform would eliminate both the personal and corporate federal income taxes as well as the payroll tax, and replace them with a federal retail sales tax plus a rebate based on each household's demographic characteristics."

"Compliance costs would be vastly lower under a retail sales tax. So would, it seems, enforcement costs. The reason is that a broad based sales tax, with no exemptions for housing or any other forms of consumption, would feature much lower effective marginal tax rates than those we now face and, therefore, much smaller incentives to evade taxation."

Thus as Jorgenson clearly indicated in his IGEM simulations, substantial reductions in price are clearly available. . As business costs fall with repeal of income and payroll taxes there is no substantive reason at all for a business to even attempt to fiddle with their employee's contracted wages, not the mention the uproar that even hinting such would raise, especially in an evironment where it is clear that businesses realize lower costs and potential for market expansion and greater profitability.

"However at bottomline, visible consumption taxes prescribe a limit on government growth, through the natural limits set by voters/consumers as they evaluate the cost of government against value received."

You lost me with that right there. Voters? Please don't expect me to let voters decide on the tax rate. Voters are not able to contain tax and spend now, what makes you think things will change in the future? Do you actually think that those in Washington who love to spend are not going to raise any tax when their precious pork spending is in jeopardy?

You're living in a fantasy world.

Voters? Please don't expect me to let voters decide on the tax rate. Voters are not able to contain tax and spend now, what makes you think things will change in the future? Do you actually think that those in Washington who love to spend are not going to raise any tax when their precious pork spending is in jeopardy?

What good is pork when the voting constituency keeping them in office is more interested in lowering the tax rate on the things they buy and use in their daily lives.

Lets see, today under the income tax we have:

The Honorable James DeMint (R-SC)
United States House of Representatives
APRIL 5, 2001

"There has been a shift in the relationship between individuals and government, he argues, such that fewer and fewer are paying taxes at the same time that more and more are receiving increasingly generous benefits. If it becomes the case that most voters do not bear a financial burden for this largess, then there will be little to restrain--and significant political incentives to encourage--the continued growth of government.

Bush touts relief as tax day looms

Another 3.9 million Americans will have their income tax liability completely eliminated, officials said.

That's 3.9 million Americans more added to the spending constituency of 70% of the public clamoring for more from government, expecting someone else to foot the bill.

It's like me in the restaurant: What do I care about extravagance if you're footing the bill?
Walter Williams

"As a matter of fact, what the income tax does — and this is the debate that I think we always try to get into in order to let you and him fight, see — and the people of this country are led down a path where the actual control of their resources, which in the end is the control over their will, is handed off to the government."
. . .
"The government then manipulates that will in order to destroy the freedom of our electoral system through the income tax structure, and we call the resulting slavery a free system."
"In point of fact, it is not as the founders understood, and the only way to restore real freedom is to give people back control over the income that they earn so that they won‘t, at the voting booth and in other phony issues, be subject to that manipulation."
- KEYES TRANSCRIPT (01/28/02)

Wonder what happens when Congress Critters even start hinting at raising tax rates on grandma's favorite goodies, and that welfare mom's next beer & cigarettes, Dell's next computer, and GM's latest & greatest, Walmarts chain of stuff, and Safeway, and ...

Under an NRST when government increases the rate of taxes on everybody to cover pork for a few, as you so clearly express it:

From what I've read, it does raise prices, considerably. The more I read, the more I hate the idea.

Taxes & Government Spending:

"The income tax in effect makes us vassals to the government – the politicians decide how much income we can keep. No mere “reform” of this slave tax, such as flattening the rate, can correct its fundamental denial of control over our own money. Only the abolition of the income tax itself will restore the basic American principle that our income is both our own money and our own private business - not the government's."

"Replacing the income tax with a national sales tax would rejuvenate independence and responsibility in our citizens. True economic liberty and moral revival go hand in hand."

"A national sales tax would also put the American citizen back in control of national fiscal policy. The best way to curtail government spending is to cut taxes, because they can’t spend what they don’t get. But with a sales tax, we could deny funds to a spendthrift government – and give ourselves a tax cut – whenever we make the private choice to alter our spending and saving habits."

Federalist #21:

"It is a signal advantage of taxes on articles of consumption that they contain in their own nature a security against excess.
They prescribe their own limit, which cannot be exceeded without defeating the end proposed - that is, an extension of the revenue."