No, I am just trying to focus the debate on your biggest lie. If you wish to define embedded taxes as something different then what Dr. Jorgenson says, you need to quit quoting Jorgenson for your embedded tax numbers.
As a matter of fact, I don't quote Jorgenson for embedded tax numbers, he doesn't provide any. Nor do I quote Jorgenson as regards wage numbers, he doesn't provide any of those either.
Nor am I aware of anywhere Dr. Jorgenson has provided his definition of embedded taxes at all such that I would differ in what he does say.
For I quote what he provides, the producer price decline Dr. Jorgenson's studies indicate would prevail with implementation of the FairTax legislation, which is 20% in the first year increasing to a total decline of 30% by the 25th year of his IGEM study, as well as a whole range of Dr. Jorgenson's IGEM results regarding the economy to place that price decline in context of growing GDP, business production and investment numbers of Jorgenson's study as a whole.
| 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. |
Dr. Jorgenson directly attributes that 20% fall to "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". Jorgenson is as clear as clear can be. He states precisely why prices will fall, and it is totally attributed to taxes on profits and wages paid by both the producer and the worker.