"Depending on what businesses do with saved corporate income taxes, so are folks with lots of stocks."
Let me see if I understand this. Under the FairTax
1. the USA becomes the largest tax haven in the world
2. the cost of doing business in the USA decreases significantly
2. the demand for US produced goods goes up substantially
3. businesses would expand to meet the increased demand
4. $11 trillion in capital would be freed to return home and be invested in expanding our own businesses.
And in the midst of this, people owning stocks would get killed? Amazing the lengths you guys will go to, just simply amazing.
This is the point we are debating, point not conceded.
2. the demand for US produced goods goes up substantially
3. businesses would expand to meet the increased demand
With #2 in question, these are based on a flawed premise.
4. $11 trillion in capital would be freed to return home and be invested in expanding our own businesses.
I assume this capital is already being invested somewhere where it is throwing off returns.
These businesses are all going to get smaller by your version of the plan, because you assume that selling prices will drop substantially. So under Fairtax math, the company now selling $10 million worth of goods or services will become a $7.7 million in sales company, who also happens to collect $2.3 million in taxes for the government. And since consumption (or you can call it decadence like some) will be taxed so that could very well have the kind of impact that you would expect-- less consumption.
I don't think you can state with any certainty that the stocks would do much better under FairTax. They could just as well get hammered. But you need to get a handle on what the first tier effects will be on wages, prices, and profit margins before you can begin to estimate what will happen to the stock market which is several steps removed and is based on things like forward growth rates, and investor confidence, and how much money there is to be invested.
Dear phil_will1,
1. For folks who are just investing, the United States already enjoys very low tax rates.
2. False premise. No evidence has been presented in any thread that's withstood critique.
2?2? False premise. This only happens if costs fall dramatically. No evidence presented that's withstood critique.
3. If we're taxing consumption, demand is likely to fall.
4. Hypothetical and probably pretty much overhyped.
"And in the midst of this, people owning stocks would get killed?"
Maybe.
We're devaluing all accumulated cash assets in one fell swoop, and depending on how corporations treat their tax savings, we may devalue other financial assets, as well.
sitetest