The fallacy in this argument lies in this statement. Businesses pay an additional tax over and above what you as a worker pay on your money. There is no reason to believe that employers would decrease anyones pay. Their savings would be on the amount they pay in on you over what you pay in (approximately the same amount held out of your wages). Check all the facts before you decide someone is right.
If you are talking about the employer half of payroll taxes, we've included that in all our previous discussions-- employers match is 7.65% of labor. They do NOT match income taxes. We've agreed that business could save maybe 10% max, with corporate taxes included where they apply.
I think you misunderstood the context. He was talking about no tax savings from elimination of employee's tax. Since employee tax accounts for over $1.3 Trillion of the $1.9 Trillion of taxes collected, without businesses being able to realize that $1.3 Trillion worth of savings, prices can not come down significantly to cover the new sales tax.
Dear Originalist,
"There is no reason to believe that employers would decrease anyones pay."
Well, sorta. Dr. Jorgenson said, in his e-mail to RobFromGa:
"I am saying that the worker would continue to receive the after-tax amount of $800."
Dr. Jorgenson is saying that the reduction in the general price level will occur because employees will continue to get their net pay (not their gross pay), and thus will not suffer a decline in take-home pay.
However, after the NSRT goes into effect, their pre-NSRT pre-tax gross wages will be reduced to their pre-NSRT after-tax net wages. Thus, no less money goes home with the worker, but the worker does not receive in his paycheck the amounts formerly paid for his side of payroll taxes, the employer's side of payroll taxes, or his personal income taxes.
The businesses will then be able to reduce prices by the amount that was being paid by and on behalf of wage earners: payroll taxes (both sides) and personal income taxes.
So, prices fall because businesses reduce prices by the amount of these taxes, and workers keep their same AFTER TAX pay, not their gross PRE TAX pay.
However, then the 30% NSRT is applied to the economy, and workers are about back to where they were (at least on average - however, I have to think about the implications of folks paying significantly different rates of effective taxes).
The real upshot of this is that all the talk about reducing price levels in the economy by 20% or more is NOT coming through "cascaded" corporate business taxes, etc. The savings, at least according to Dr. Jorgenson, come primarily from reducing the gross pay of workers so that their gross pay will be equal to their old after-tax net pay.
sitetest
Thanks for saying this. Some wierd math going around here.
Saying that Employers would not let workers keep the taxes which are no longer being paid to Ucle Sam is really beyond normal thinking. This is theory and nothing else.
I think the main thing People should remember is that a plan is far different than an actual law.