10.5% GDP growth in the first year is SMOKING.
That kind of growth certainly does not support any ideas of falling wages or business profitablity with lower producer pricing structures due to the repeal/removal of federal business taxes from the backs of our businesses.
With higher production that goes with that level of growth, the increase in demand for additional labor precludes any such notion.
The following is a table constructed from the information in the Jorgenson FairTax study showing the increase in production quantity, change in producer price.
In the third the final column I computed the price,(based on 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% |
All of this Jorgenson stuff is based on the idea that workers will receive smaller gross pay, it all falls apart once you give the workers their full paycheck.
And it is ten years old, the tax code, and the world has changed. Businesses have become more global, and eliminated layers of cost, corporate and capital gains taxes have changed, income tax rates have been lowered.
Get Jorgenson to do a new study, and make it clear to him that you want him to be sure and keep all the workers and business owners getting to keep their income and payroll taxes as a windfall pay increase, and have him turn his Big Ol' Econometric Forecasting Machine back on and see if it doesn't spit out something awful.
Note that even under his flawed assumptions, he still had Crude Oil and Refining with large increases. With realistic current numbers those will only get worse.