[ancient_geezer]

This study is not available anywhere on the net.

One study available on the internet of a barebones NRST replacing only the income tax compared with the Armey/Spector Flat Tax doing same came up with a 20% drop in prices received by the producer in first year for the NRST, 6-8 percent for the Flat Tax.

http://www.economics.harvard.edu/faculty/jorgenson/papers/baker.pdf (November 6, 1998 revised 1999)

 

I assume the fair tax organization has it, but since they grossly misrepresent what Jorgenson is on record as saying, I highly doubt they will ever release it.

If you want a copy of the specific study done for the FairTax, all you have to do is drop AFFT an email and they will send you a PDF copy of it just as they did for me.

Here is a summary results taken from my copy that study:

 

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

INTRODUCTION AND SUMMARY

The purpose of this report is to analyze the economic impact of substituting the National Retail Sales Tax (NRST)for individual and corporate income taxes,the Medicare,Social Security, and FUTA payroll taxes,and the estate and gift taxes.1 I consider a revenue neutral substitution-one that leaves the government deficit unchanged. Finally,I focus on the impact of this fundamental tax reform on economic growth over the next quarter century.

I have summarized my conclusions in a series of charts:

1.The revenue neutral substitution of the NRST for existing taxes would have an immediate and powerful impact of the level of economic activity.The first chart gives a projection of GDP under current tax law. The second chart shows that GDP would increase by almost 10.5 percent in the first year.This increase would gradually decline to a little under 5.4 percent over the next twenty-five years.

2.Taxation of consumption would induce a radical shift in the composition of economic activity-away from consumption toward investment. The third chart shows that real investment would initially leap by a staggering 76.4 percent and then gradually fall to about 15 percent higher than under existing taxes. The third chart reveals that real consumption would initially decline by 9.1 percent. However,consumption would overtake the level under existing taxes within five years and grow rapidly under the NRST.

3.Holding net foreign investment constant,the fourth chart shows that exports would jump by 26.4 percent under the NRST, while imports would rise only modestly. This is the consequence of excluding exports from the tax base while including imports. The initial export boom would gradually subside, but exports would ultimately remain more than 13.3 percent above the level under the current tax system, while imports would fall a modest 0.9 percent below this level.

4.As a consequence of the elimination of taxes on capital income,individuals would sharply curtail consumption of both goods and leisure. In addition,the implied subsidy to leisure time would drop to zero under the NRST; under the existing tax system this is equal to the marginal tax rate on labor income. The fifth chart shows that the NRST would generate dramatic growth in the capital stock and a sharp initial rise in the labor supply that would gradually decline over time.

5.Since producers would no longer pay taxes on profits or other forms of capital income under the NRST and workers would no longer pay taxes on wages, prices received by producers, shown in the sixth chart,would fall by an average of twenty percent.The seventh chart shows that industry outputs would rise by an average of twenty percent with substantial relative gains for investment goods producers.

6.In the long run producers’ prices, shown in the eighth chart,would fall by almost thirty percent under the NRST.In addition,the shift in the composition of economic activity toward investment and away from consumption would drastically redistribute economic activity among industries.The ninth chart shows that production would rise in all industries,but the increase in production of investment goods would be relatively greater.

7.The imposition of the NRST would produce a sharply higher tax rate on consumer goods and services, but the tenth chart shows that the initial consumption tax rate would be twenty-three percent at both federal and state and local levels or only 18.4 percent at the federal level. This would gradually rise over time,but remain below thirty percent or 23.8 percent at the federal level.

[phil_will1]

"1.The revenue neutral substitution of the NRST for existing taxes would have an immediate and powerful impact of the level of economic activity.The first chart gives a projection of GDP under current tax law. The second chart shows that GDP would increase by almost 10.5 percent in the first year.This increase would gradually decline to a little under 5.4 percent over the next twenty-five years."

Thanks for posting that, AG. It is good to put some of the comments on this thread in their proper context. The naysayers are quick to point to Jorgenson and interpret his meaning with respect to the treatment of employee paid taxes, but they completely miss the big picture of his study. 10.5% GDP growth in the first year is SMOKING. I doubt that the USA has had a year like that in the last century or so, not even in the go-go 90s. Other economists have shown similar findings, some, I believe, with even higher 1st year GDP growth estimates.

And yet here we have the naysayers predicting economic collapse and a stock market crash. Amazing, just amazing.

[RobFromGa]

5.Since producers would no longer pay taxes on profits or other forms of capital income under the NRST and workers would no longer pay taxes on wages, prices received by producers, shown in the sixth chart,would fall by an average of twenty percent

He's claiming prices would fall by twenty percent because (since) producers are not paying tax on profits and workers are not paying taxes on wages.

Do you dispute that he thinks that this implies that the producer is expected to realize a cost savings from the fact that workers are not paying taxes on wages?

And do you dispute that the only way the producer is going to recognize a cost savings is if he doesn't give his workers 100% of the same gross pay he is now giving?

So, this means that Jorgenson's model was based on the wage earners NOT getting their entire 100% current paycheck, but instead they would be getting 100% of a new gross paycheck, about the same as what they are now getting after payroll and income taxes.

FairTaxers are misrepresnting this study to sell their plan.

[Always Right]

5.Since producers would no longer pay taxes on profits or other forms of capital income under the NRST and workers would no longer pay taxes on wages, prices received by producers, shown in the sixth chart,would fall by an average of twenty percent.

Exactly, and there is the $1.335 Trillion lie. The 20% embedded taxes INCLUDES taxes workers pay. So anyone who says workers get to keep the full paycheck AND prices come down 20% are telling a huge lie. But Boortz and the fairtax organization keep telling that lie.