You should look at the example in #311 a bit more carefully since it is not at all like the earlier post of mine from four years ago. This was an example I noticed on the internet and I realized it better illustrated the mechanism of cascading embedded taxes that did the earlier example.
This table uses the marginal tax rate as given by the IRS SOI for 2001 on Subchapter C-corporations filing Form 1120 - which was the exact type of corporation specified by the FairTax opponent debating the effect. It does not use "percent of revenue" which is a meaningless term for the purposes of calculating the embedded tax and it's cascading.
Nor does it have the efeect where "the outcome inflates rather quickly to an extraordinarily large level." In fact the numbers reach a very conservative level asymptotically. This yields a more conservative approach overall and I believe is more representative of the cascading effect (up to a point). It is the mechanism that is the thing of interest here rather than the numbers themselves.
The embedding of tax costs into prices also goes on at all levels of business and not merely C-corps as many have stated. For that reason insisting on using only corporate taxes in any sort of analysis is greatly misleading and leads to results that are greatly biased downward. There are many other types of businesses and they are all potentially subject to paying taxes on the amounts subject to being taxed - even if they are S-corps, partnerships, proprietorships, etc. and therefore paid with other than a Form 1120 submission.
While not precisely the same, your example from four years ago shares one major flaw with the table you posted in #311:
both use an exceedingly high number for profit as a percent of revenue. The old table used 18%, the current table uses an even more unreasonable 33%.US corporations average a profit of between 5% and 6% of revenue (before income taxes.)
The old table added tax to input cost to get price (curiously ignoring the rest of profit as a component of price.) The new table also adds tax to input cost, but also adds the entire profit on top of that. That, my friend, double counts the tax (FairTax folks seem to favor double counting ;-) Under any standard accounting procedure, tax is deducted from gross profits (PBT) to get net profit. Tax is never added to profit to get price!
This table uses the marginal tax rate ...
Nobody is suggesting a problem with the marginal tax rate, it your choice of profit at 33% of cost that is the problem (nobody who does accounting the way you have would be an accountant for very long!)
In fact the numbers reach a very conservative level asymptotically.
Not possible. The algorithm at the heart of the table you posted is a "compound interest" algorightm. It does not converge; it does not approach an asymptote. It expands indefinately and infinitely as the number of periods (levels) grows. And, most importantly it does NOT even come close to modeling the impact of tax on price!
It is the mechanism that is the thing of interest here rather than the numbers themselves.
Nice dodge; but, actually, BOTH are of vital interest:
First you have to get the algorithm right. Both tables (the one in #311 AND the one four years ago in #147) have incorrect algorithms.Second, you have to use numbers that reflect the situation you are attempting to model. Your numbers greatly exagerate the problem you are trying to illustrate.
While I agree that taxes are indeed embedded in the price of goods and services, the level of these so-called "hidden taxes" is not nearly as great as you would lead us to believe.
For that reason insisting on using only corporate taxes...
Who insisted on WHAT? What thread, what posts are you reading anyway? I have taken issue with YOUR table: it's hogwash. You appear to be the one insisting on using selecive data (incorrectly at that) and bogus reasoning.