As I've told you before, percentage of revenue is meaningless when it comes to embedded taxes. Your continued attempts to use it to come up with a lowered number is pathetic.
Why don't you find the preponderance of major industries that pay a tax rate of less than, say, 30% on their profits.
As for the cascading tax example, the meaning is clear enough in that the developer intended the term "profit margin" to be the desired profit margin of that level. On L1, then the tax amount that is embedded is $0.33 x 0.34 = $0.11. The input plus the two other figures then total up to the selling price. Calculating the pre-tax profit as a % of the selling price is meaningless since the tax to be paid is the $0.11 calculated in the example and not figured on a percent of the selling price - that's merely your attempt to use the meaningless "revenue" as a base for taxation. The correct figure to use is the amount subject to tax ("profit margin" in the example) times tax rate ("tax rate" in the example). Taxes are calculated and paid with that calculation as a base ... check with the IRS if you can't figure that out.
Your similar attempt to redefine the calculation in L2 is also incorrect for the same reason plus your error in trying to add the profit from L1. The profit in L2 is, as stated, $0.48 (not $0.64) and the tax rate is 34.4% as stated which gives a tax due of $0.16.
Your attempt to redefine the example isn't going to work - mainly because it is not related to how taxes are derived. You'd no doubt LIKE to show taxes as a % of revenue, but that ain't the way it's done so stop the idiocy. You're fooling no one (except yourself - if you genuinely believe that).
You also missed (or don't understand /or don't wish to understand) that the example was never presented as representing a real world business but is a simple example of how the tax cascading mechanism works. So you can look at "income statements" until uou're blue in the face. Unless you learn how taxes are calculated, you'll always be looking at the wrong numbers as you are now.
Hint: Look on the P&L for something like "income subject to taxation" and " income tax paid" and divide the latter by the former. That'll give you a tax rate for most major industries of something like 34.4% for the 2001 IRS SOI.
And that's the tax rate used in the example in #399.
It's really unbelievable that you don't know how taxes are derived.
What's really unbelievable is that you can't admit that it is idiotic to claim that every wage earner in America can get a 25%+ pay raise, plus have everything he buys cost the same (on average) as it does now even when the FairTax is added, plus he's going to get an allowance from Mommy Sam every month. That you think this is remotely possible, and that this could possibly be a realistic plan, is hard to believe.
Dear pigdog,
"As I've told you before, percentage of revenue is meaningless when it comes to embedded taxes."
LOL. No it's not. Not if you want to talk about "embedded taxes."
Companies don't sell their profit. They sell stuff and receive REVENUES in return.
Wal-Mart sold about $288 billion worth of stuff last year.
That was their REVENUE. That is approximately the sum total of all the prices they got for stuff that they sold in all their stores for the year.
It's YOUR spreadsheet that looks at tax as a percentage of PRICE, pigdog. Revenues are just the sums of all the prices received on all sales.
When someone goes into a Wal-Mart and spends $100, that $100 is REVENUE, not PROFIT. Profit is only a small piece of the sales revenue (in the case of Wal-Mart, about $5.60).
Do you understand that Wal-Mart doesn't actually keep all the revenue they take in, as profit?
On that $285 billion in sales, they made about $16 billion in pre-tax profit. They paid around $4 - $5 billion in federal corporate income taxes.
That's around 1.6% of REVENUES.
That's the relevant statistic, pigdog. Why? Because if you bought $100 worth of stuff at Wal-Mart, about $1.60 would be Wal-Mart's federal corporate income tax.
That's the percent of the $100 that someone spent that went to pay Wal-Mart's federal corporate income taxes.
If you get rid of the federal corporate income tax, that's the amount that could be saved on the $100 of purchases: $1.60, 1.6%.
"The correct figure to use is the amount subject to tax ('profit margin' in the example) times tax rate ("tax rate" in the example)."
Yes, as I explained to you.
The "amount subject to tax" is the TOTAL PRE-TAX PROFIT, not the AFTER TAX NET PROFIT.
Your "34.4%" is on the AFTER TAX NET PROFIT. The amount of money paid in corporate federal income taxes is actually a part of the pre-tax profit, pigdog.
The "amount subject to tax" is actually 44 cents - the TOTAL PRE-TAX PROFIT. And 11 cents of that is 25%, not 34.4%.
"Your attempt to redefine the example isn't going to work - mainly because it is not related to how taxes are derived. You'd no doubt LIKE to show taxes as a % of revenue, but that ain't the way it's done so stop the idiocy. You're fooling no one (except yourself - if you genuinely believe that)."
* chuckle *
Anyone who actually understands this debate knows who is fooling himself.
I'll give you a hint, it ain't me.
Anyway, again, your spreadsheet shows federal corporate income taxes as 11% of revenues. I challenge you to find 20 Fortune 500 companies with federal corporate income taxes of 11% of revenues or higher. I'll find 20 with federal corporate income taxes of 5% or lower. If we both get 20, we'll keep going until we each run out.
You should be able to demonstrate very easily that there are many, many companies that pay 11% of their revenues out in federal corporate income taxes, as you've stated that this is the norm.
I betcha you can't.
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