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Here is what I found out today. It backs up our contention that the FairTax Book is misrepresenting Dr. Jorgenson's testimony and report.

Pinging you to some detective work I have been working on today.

ping!!

Thanks so much for your time spent on this. While the fair tax has good points, it needs critical study and dissection (as you demonstrate) to see if it is indeed worthwhile.

What it really shows is that Dr. J. assumes the workers will get only their after income tax pay. There is obviously a difference of opinion as to the matter; that is not the same thing as a misrepresentation as the Squirrels like to claim. I haven't yet decided which approach is correct but that has no effect on the benefits of the FairTax to the economy overall.

It will certainly all shake out in the end before the bill is passed - and it will be passed since there are too many benefits to the US economy for it not to pass.

Regardless of the differences on the percent of wages taken home (or not), there is still he matter of business income taxes (and no, s-test, that is not just Subchapter C-corps but all businesses). Those cascading embedded taxes are done away with by the FairTax whether you admit it or not - and they are sizeable. Are you pretending that they do not go to lowering prices?? And the taxes ARE calculated as the amount of tax paid divided by the amount of income subject to taxes just as the example (and the IRS SOI) shows (called "tax rate" in the example) and NOT as a percent of revenue.

Keep in mind the example included only business income taxes and not employees' taxes or compliance costs. So that others can see how the embedded tax mechanism works, here's the example again using the marginal tax rate of the Subchapter C corporations that s-test insists are the only business tax payers:

	LEVEL		1	2	3	4	5	6
		INPUT	$1.00	$1.44	$2.08	$3.01	$4.34	$6.27
33.00%	PROFIT MARGIN	$0.33	$0.48	$0.69	$0.99	$1.43	$2.07
34.40%	TAX RATE	$0.11	$0.16	$0.24	$0.34	$0.49	$0.71
	SELL PRICE	$1.44	$2.08	$3.01	$4.34	$6.27	$9.05
							
Accumulated tax costs	$0.11	$0.28	$0.51	$0.86	$1.35	$2.06
Tax costs as % of 	7.86%	13.31%	17.09%	19.70%	21.51%	22.77%
   sell price

And, oh, yes, s-test does not understand the mechanism and tries to make it out to be some sort of compilation of arriving as a sales price - that's not what's involved but instead is an insight into how income tax paid by business is embedded into prices and cascades being taxed again at the next level. Nightie also tries to warp this into something it is not.

What it is is a simple example that clearly illustrates the mechanism of cascading embedded tax costs - these are over and above tax on employees wages and over and above compliance costs.