http://fairtaxvolunteer.org/pdf/BROCHURE.pdf
Page 11 states that $225 billion is spent complying with the income tax. That's about 2% of the GDP. Even if (big if) that is all for business and doesn't include individuals tax calculation expenses or imputed value for the time individuals spend on IRS forms, it is still only a small part of the 23% embedded taxes assumed by FairTax.org.
Very significant price reductions? No, maybe a couple of percent.
Indeed! Do you suppose that to be the ONLY cost imposed outside the tax itself?
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.