Posted on 08/15/2005 5:55:06 AM PDT by OESY
A major domestic battle looms this fall, when tax reform-- a centerpiece of the president's bold domestic agenda-- will finally be on the table. The President's Advisory Panel on Federal Tax Reform is expected to release its findings by the end of September. After the political shellacking the White House took on Social Security, the administration will be strongly tempted to take a conciliatory path that supports only superficial reforms, essentially preserving the status quo of our hideous income tax code.
Such a course would have perilous consequences, economically and politically. In fact, the administration has an opportunity here to boldly retake the initiative, to recover lost political support and thrust an already decent economy into high gear and, at the same time, make America better able to meet intensifying competition from China, India and others. How? By junking the entire federal income tax code and starting over with a flat tax. A growing number of countries are doing this -- and so should we.
The current system is beyond redemption, a beast whose complexity, confusion and outright unfairness have corrupted our economy and society. Americans waste more than $200 billion and over six billion hours each year filling out tax forms. They engage in all kinds of useless economic activity intended to take advantage of the code's complicated maze of deductions and to reduce taxes -- from deducting donations of old socks to making unwanted investments. The waste of brainpower -- at a time of increasing global competition -- is incalculable.
The code corrupts our system of government by encouraging the crassest political conduct and by creating a massive, intrusive federal bureaucracy. One-sixth of the private-sector employees in Washington are employed by the lobbying industry. One-half of their efforts are directed at wrangling changes in the tax code....
(Excerpt) Read more at online.wsj.com ...
You might also study post #98 on that same thread which shows some of the fallacies in the referenced post (#23).Yeah, look at them, RFG. You we see yet another example of the logical fallacies you are becoming use to from the FairTax crowd.
You don't have a clue what you're talking about.
can you find the problem with my car wash example (post #271, #281, #321)? How do you turn 8% best case savings into 23% cost savings?
If there is going to be a big savings in tax compliance costs it'll come from the accounting department won't it?
Where are you finding it?
Yes, Rob and be sure to read the entire rebuttal to Gale's piece (not just the OOC posts from Nighie) as well as the entire Real Estate piece. You will see that both of these are quite the opposite in meaning of what Nightie is trying to foist upon others.
If you don't see that, then please advise and I link you to some more data.
Under the present tax system (or any income-based tax system) any after-tax savings will be taxed again in the form of higher prices that are caused by embedded tax costs incorporated into prices that range around 20-25%. Current savers will be hit with this under the present system, and denying it exists (as the SQL camp likes to do) does not eliminate it.
New question I haven't seen before...
What will be the effect of FairTax on energy prices?
imported oil, gasoline, natural gas?
I assume that the price of the imported oil will remain the same since there are few US embedded taxes in foreign goods, but there will be a 30% surcharge at retail on every gallon of gas at the pump? Is this correct?
surely you know the answer to #346 off the top of your head...is is the employers or the employees 7.65% under the FairTax plan?
If you don't see that, then please advise and I link you to some more data.If you don't see that, then please advise and he'll start calling you names.
ever seen any discussion on my #348 re: effect of FairTax on energy prices?
What will be the effect of FairTax on energy prices?
imported oil, gasoline, natural gas?
I assume that the price of the imported oil will remain the same since there are few US embedded taxes in foreign goods, but there will be a 30% surcharge at retail on every gallon of gas at the pump? Is this correct?
Last I heard, all energy suppliers, retail level, transporters, wholesalers, refineries, shippers, pumping, drillers etc all pay income and payroll taxes today, all of which will be repealed and replaced by a single retail sales tax at the retail register.
As a consequence the effective price of energy products as well as many other specific sectors should see change in overall price (gross including taxes remitted by businesses and there tax related costs) in accordance with the following estimates assuming a full 23% NRST tax rate (based on tax law and economy prior to the Bush administration tax cuts.)
Here is a table compiled from Dale Jorgenson's US Business sector estimates of change in production and price received by producers for the Fair Tax legislation that takes the import/domestic mix of materials and goods into account.
Jorgenson uses an IGEM simulation solving equilibrium prices for optimum business profits across 35 busness in balance with a set of household consumers across a full range of demographics and incomes seeking maximum value for their 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 compute 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 for FairTax legislation, replacing 1996 tax law | |||
| 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% |
Thanks for the article.
Obviously the price of oil has gone up fourfold since 1997 while the price of labor etc hasn't. So what was +10% is likley much higher now. It would be interesting to see a current analysis. Energy costs are a hidden "tax" on the price of most goods.
The embedded income and payroll taxes are not going to be saved by the business, they will be given to the employee. This will not contribute one nickel to the bottom line of the oil companies just to their employees.
Thanks for the article.You should note that in the IGEM model used to come up with those price reductions, the price of labor goes down as the marginal tax rate on labor goes down (i.e., wages go down as personal taxes go down).
It sounds as though you know its an assumption.
In any event it would be a tax and not a surcharge. I believe that you could determine this from reading the bill.
I'm just asking whether you are counting the 7.65% employers portion of FICA as a cost savings to the business or is it the employees that will become part of his paycheck under your understanding of the FairTax. It is not a trick question except for that you have to choose one way or the other. So in that regard it probably looks like a trick since you can't have it both ways.
What do you think a_g?
That article also assumes the imported cost of crude oil will drop by more than 13% by enacting the fair tax. How is this possible when it is mainly imported?
Obviously the price of oil has gone up fourfold since 1997 while the price of labor etc hasn't.
Price of labor is not where costs lay in terms of the sector costs of oil out of the ground being shipped to a refinery for processing. Storage, shipping, equipment, exploration, refining, all are capital intensive not labor intesive proposition.
The fact is in the fuel sector little of the cost of oil or its refined products are labor. The costs of oil are related to supply and capital factors by a wide margin over any labor factors.
The embedded income and payroll taxes are not going to be saved by the business, they will be given to the employee.
Sure they are, seems to me that they are even more likely to go to reducing energy prices at the retail side to increase sales margin and profitibility long before any such business is going to increase the wage of an employee unless that employ can somehow increase production to make up the difference in wage and yield a corresponding opportunity to incease market at the expense of the competition.
Secondly taxes per-se are the lesser part of the expense on business, tax related costs involving, planning, accounting, reporting, litigation, tax avoidence schemes, and depressed production under tax-cost related pricing in the income tax system are a much larger factor the merely the tax remitted to government. Any such saving are much more likely to accrue to maximizing profit by increasing market share against competition which is intense in and commodity sector.
This will not contribute one nickel to the bottom line of the oil companies just to their employees.
Show us some studies that support your foundationless assumption. Your assertions simply don't stand up to any application of reason.
That article also assumes the imported cost of crude oil will drop by more than 13% by enacting the fair tax. How is this possible when it is mainly imported?Welcome to the wonderful world of economic models! Anything is possible!
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