"This means that when they are repealed, producer prices will come down as research conducted by Harvard's Dale Jorgenson suggests.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."
Which Kotlikoff never said.
Strange, you don't seem to be paying much attention are you, for Kotlikoff said:
Statement of Laurence J. Kotlikoff,
http://waysandmeans.house.gov/legacy/fullcomm/106cong/4-11-00/4-11kotl.htmProfessor 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."
While Mastromarko & Burton, (you know the one's you have been partially quoting to us from,) and found in full context in comment #318, pointed out Jorgenson's findings:
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Response to William Gale by Dan Mastromarco and David Burton J. Gail Perspective: Consumer Pricing: Up, Down and Sideways Simultaneously
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Talk about dishonest.
Lame, really lame.
Mastromarco, Burton, and Kotlikoff are very clear on the effect of the FairTax on prices and wages. It's an "either/or" situation.
Actually Mastromarco, Burton state it as "if/then" and "could be" scenarios as regards Gale's inconsistant positions, hardly an imperative choice of either case for the FairTax.
"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."
While Kotlikoff merely makes statements under a conditional assumption for a particular scenario involving the effects of CPI (which includes sales taxes) indexing of government benefits.
"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)"
"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. "
Assumption for scenario statements is a far cry from an imperative. Especially as business tax related overhead cost are substantially lower under a retail sales tax resulting in considerable cost savings to the business:
Statement of Laurence J. Kotlikoff,
http://waysandmeans.house.gov/legacy/fullcomm/106cong/4-11-00/4-11kotl.htmProfessor 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."
Cost savingfs which provide a substantial advantage to be exploited in capturing market share in from laggard competitors.
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Response to William Gale by Dan Mastromarco and David Burton J. Gail Perspective: Consumer Pricing: Up, Down and Sideways Simultaneously
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Tut tut, AG. You're changing what you said.