Just to clarify my point: we all know there are some cost savings to businesses, we are only arguing about how much.
We can look at the 2004 IRS data book and see (roughly):
Corporate Income Tax: $200B
Payroll Taxes: $696B
Individual Income Tax:$900B
Half of the Payroll taxes are paid by businesses. Some portion of the Individual Income tax is paid by businesses in the form of sole proprietorships, partnerships, LLCs, etc. that are not included in "Corporate". Maybe another $200B.
The widely used figure for Income Tax Compliance is $225B, most of which would be business -- including individuals with a business, whose compliance costs are obviously much higher than for simple wage earners. So figure $150B for that. This figure does not count Payroll Tax Compliance, so figure another $50B, maybe.
So we could easily conclude a minimum of $950B savings to businesses. And it all had to paid from prices charged to customers.
The FairTax base for 2004 would have been $8.7T. So the $950B would be at least 11% of those retail sales. The portion of those retail sales which was produced in America was only $6.7T, because $2T of what was sold was imports, which had lower taxes and compliance costs embedded in them. So we are at somewhere between 11% and 14% without even trying hard.
Maybe Jorgenson needed to include the employees' taxes to get up to the higher percentages quoted. But certainly his response should not be interpreted to mean there is NO price reduction available without reducing gross wages.
I have agreed that there is likely 8-10% cost savings to be realized through:
1)elimination of employer FICA match both as it applies to the labor portion of the business costs, (about 7.5% of labor)
2) elimination of employer FICA match embedded in purchased goods (maybe 5% of purchased parts),
3) C corporate taxes (about 1-2%),
4) compliance costs (0.5-1% max)
To get to 23% there needs to be savings to the business from the employee half of FICA and income taxes.
Some portion of the Individual Income tax is paid by businesses in the form of sole proprietorships, partnerships, LLCs, etc. that are not included in "Corporate". Maybe another $200B.
If you are going to give the wage earner his "full paycheck", you need to do the same for the business owner, so you cannot add this $200B to your savings. And the $225B compliance costs is probably quite overstated considering that businesses will still require their accounting staffs to do almost everything they now do, except fill out federal income tax forms. But all this information will still be needed to file with the SEC, to manage the business, and to document the business expenses to make it an airtight audit trail.
So, using your numbers I would get $350B (employer half of payroll) + $200B (corporate taxes) + maybe $200B (a guess)= $750B out of $8.7T for 8.6%. But we are at least in the same ballpark and in agreement that to get to 23% reduction, the money will have to come from Income Taxes and Employee portion of payroll taxes. 23% of 8.7T is $2T-- the money we are looking for is what you see referred to as the "missing Trillion" or the "missing $1.35T". It is an interesting coincidence (not really) that the individual income taxes + employee half of payroll taxes are equal to the missing amount.
The study assumed that the payroll and income taxes would accrue to the employer, and Jorgenson confirmed it. The "full paycheck" is a misreprentation.