Posted on 08/24/2005 9:40:44 PM PDT by RobFromGa
The FairTax base for 2004 would have been ~$9,716 billion. Add $1,173 billion in exports to that (they claim taxes are embedded in them too) and you get $10,889 billion. This is the amount that is suppose to be reduced by ~22%. In 2004, corporate income taxes were $189.4 billion, add half of the employment and general retirement receipts ($344.6 billion) and you get a grand total of $534 billion in tax revenue from corporations. That is 4.9% of the FairTax base plus exports or 5.5% of the domestic FairTax base alone.
Page 11 states that $225 billion is spent complying with the income tax. That's about 2% of the GDP.
The same figure that Dr. Williams uses.
Dr. Walter E. Williams, March 2000:
http://www.freerepublic.com/forum/a39b6487a1fb0.htmThe average taxpayer now pays more than $8,000 a year, working from January 1 to May 8 to pay federal, state, and local taxes. In addation to the out-of-pocket cost, Americans spend 5.4 billion hours each year complying with the federal tax code-roughly the equivalent of 3 million people working full time. If it were employed in productive activity, the labor now devoted to tax compliance would be worth $232 billion annually. The federal cost of hiring 93,000 IRS employees is $6 billion. If these Americans weren't fooling around with the tax code, they could produce the entire annual output of the aircraft, trucking, auto, and food processing industries combined..." Emphasis adde
All that is, are the accounting costs associated with the income/payroll tax system referred to as compliance costs.
That does not begin to cover the costs arising from tax avoidence and income sheltering schemes that provide nothing to productivity of a business, audit/litigation costs, fines and penalties paid by businesses in resolving conflicts with the IRS, loss due to market inefficiencies introduced by income and payroll tax system that drive prices higher and consequent lower sales volumes resulting in loss to profitability.
There is alot more to the impact of the income/payroll tax on businesses (and individuals as well) than just that number of $225 billion for "tax compliance".
The actual total impact on the economy is estimated by Fed Reserve economists to be somewhere between 2 and 4 dollars for every additional dollar of revenues collected and expended by the government.
Economic Burden of Taxation
William A. Niskanen
Presented October 2003
Friedman Conference
Federal Reserve Bank Dallas page 6.
www.dallasfed.org/news/research/2003/03ftc_niskanen.pdf
- "Given that the elasticity c implicit in recent U.S. fiscal conditions is about 0.8 and the average tax rate is about 0.3, the marginal cost of government spending and taxes in the United States may be about $2.75 per additional dollar of tax revenue. One wonders whether there are any government programs for which the marginal value is that high. Given the estimate of the long-term elasticity c from the U.S. time-series data, the marginal cost of government spending and taxes may be as high as $4.50 at the current average tax rate. "
http://www.heritage.org/Research/Taxes/hl565.cfm
- An American Economic Review study found that every dollar of taxes could impose as much as $4 of lost output on the economy, with the probable harm ranging between $1.32 and $1.47
Edgar K. Browning, "On the Marginal Welfare Cost of Taxation," American Economic Review, Vol. 77, No. 1 (March 1987), pp. 11-23.
- "Another study in the Journal of Political Economy estimated that the corporate income tax costs more in lost output than it raises for the government."
Jane G. Gravelle and Laurence J. Kotlikoff, "The Incidence and Efficiency Costs of Corporate Taxation When Corporate and Noncorporate Firms Produce the Same Good," Journal of Political Economy, Vol. 97, No. 4 (1989), pp. 749-780.
That is a lot of room for improvement, substantially more than 2% of GDP, I would say.
If the fair tax only removes 10-18% from the overall price level, as I have believed for a long time now, it is still the best plan out there.
"....give me my ENTIRE PAY CHECK, NO IRS, UNTAXED INTEREST, NO ESTATE TAXES, NO CAPITAL GAINS taxes and I'll show you a WEALTHIER more PRODUCTIVE and FREE AMERICAN!!!!"
AMEN!
"Who do you think pays for tariffs and business taxes? Clue: it isn't the nation importing goods or business providing goods and services we pay for as consumers."
I am not deceived into thinking we do not pay taxes exerted on the businesses which we patronize.
How about this, then. Rather than eliminating the tax altogether, how about we require taxes be paid, rather than being withheld in the average worker's paycheck?
That would have nearly the same effect as eliminating it. I am fine with that instead.
Thank you!
Busy day here and I had temporarily forgotten about the research you linked us to.
I KNEW that I had seen that somewhere! It is what I was refering to the other day on another thread.
bttt
Get it?
I've run my business out of my home since 1986. You're really barking up the wrong tree here. Your concern is misplaced- it's really a small factor in the big picture. The IRS is way more dangerous, and the concept of taxing income itself is more an instrument of control than revenue collection. (Check my home page for a few interesting quotes on that subject.)
Thanks for this post. As I've always thought, the term "FairTax" is really the definition of an oxymoron.
Dear Originalist,
I don't put any particular stock in Dr. Jorgenson. I'm not a proponent of the NSRT. However, he's the guy who developed the model to support the idea of the NSRT, and thus, figuring out precisely what he said clarifies the discussion. That's all.
That being said, I CAN understand his reasons for developing the model in the way that he did, passing the saved taxes to consumers, in that this model seems intuitively to me to create more overall economic advantage, than returning the saved taxes to the employee.
However, I truly doubt whether the model can be implemented as he has designed it.
sitetest
This post has to do with the implications of replacing the Federal income tax with a Federal flat value added tax, and everything that you posted has to do with a system that would be scrapped.
This thread has to do with a National RETAIL Sales Tax, replacing all federal income and payroll taxes (e.g. SS/Medicare).
No VAT is involved as the retail tax is collected only from sales of goods and services for final consumption, and is not collected on purchases for business use as VATs are collected.
The NRST implemented by the FairTax legislation would be collected from the consumer, not from intermediate sales of good or services used for business purpose.
Dr. Jorgenson's research is what many of the fair taxers predictions are based on. In fact, the research is paid for and owned by AFFT, a fair tax advocate. The point of the post is that the fair taxers have lied about what Dr. Jorgenson's report actually said by the tune of $1.3 Trillion.
Once the Federal government is organized around collecting taxes on your sales receipts, what makes you think that the same IRS personnel won't be as aggressively dedicated to assuring that they get their cut?
Dear Carry_Okie,
"Once the Federal government is organized around collecting taxes on your sales receipts, what makes you think that the same IRS personnel won't be as aggressively dedicated to assuring that they get their cut?"
Because the NSRT legislation ABOLISHES the IRS.......
.....and sets up a new bureaucracy with a different name to administer the NSRT.....probably with many of the same folks from the IRS.
As well, much of the duties associated with the NSRT will be handled by the states with money from the federal government. So, instead of their being ONE FEDERAL AGENCY chasing folks down for money, there will be FIFTY BEEFED-UP STATE AGENCIES, with a new stream of revenue from the federal government, to chase us around.
Remember, now, compliance costs WILL go down. Compliance costs WILL go down. Compliance costs WILL go down. Keep repeating that. At least until you believe it.
sitetest
Exactly, and read the bill. Who does the bill make liable for the tax???? The consumer. The consumer must have a valid receipt showing he paid the tax in order to shift the liability to the retailer. The bill also says if they suspect you owe taxes they can audited you. The biggest change with the enforcement is the new collection agency will watch your outputs more than your inputs.
I haven't been able to read the whole thread yet since I've been out all day, but I haven't heard anything from anyone. I faxed and email this to Linder, Boortz and Jorgenson at 1130 or thereabouts last night.
I called Linder's Georgia office this morning and requested through his scheduler to arrange an appointment, with no word. I am not saying there is anything wrong with this, I do expect him to respond eventually as I am in his Congressional District.
I have to go back out again and just wanted to bump the thread. I hope that everyone is playing nice.
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