Winners and Losers under the 'FairTax'

hripka | September 28, 2005 | self

[ancient_geezer]

Then those studies are irrelevant.

The show us a relavent modelling that demonstrates your conjecture.

Just for the record which "studies" are you referring to?

Jorgenson, Wilcoxen 1998 revised 1999 works well. A comparative study between the Armey/Shelby flat tax & income tax baseline.

If you have a dynamic study that that deals with a graduated income tax system that providing a similar comparative view, or one of more recent origin, it would be good to see it. I don't know any off hand but I open to looking at whatever you might come up with.

And what, exactly, is the "disincentive for consumption" under the FairTax?

You might try an open and visible tax on items of consumption for one. Works great to provide that extra motivation to chose between consumption today or socking earnings away against the future after they grow abit.

 

Now you're into your own personal conjecture. You seem to have a penchant for relying on studies that don't come close to modeling the assertions you make.

http://www.economics.harvard.edu/faculty/jorgenson/papers/baker.pdf

• " Figure 6 compares the impacts of the two tax reform proposals on consumption. The impact of the Flat Tax in 1996 is to increase consumption by 3.5 percent, relative to the Base Case. This impact gradually diminishes over time, falling to 1.3 percent by 2020. While it may seem paradoxical that consumption increases with a rise in the consumption tax, the marginal tax rate for low-income taxpayers is reduced to zero, stimulating consumption."

• " Figure 7 compares the impact of the two tax reform proposals on investment. The impact of the Flat Tax in 1996 is to depress investment by 8.6 percent, relative to the Base Case. Investment recovers over time, eventually reaching a level that is only 1.7 percent below the Base Case in the year 2020. "

[ancient_geezer]

No we don't. We just defer the tax to a late date. And in retirement, collection SS and taking distributions from tax favored investments virtually guarantees you'll pay income tax on your gains.

Yes that well describes the current system with its 401k and most IRAs. That however has a conseqence when you go to a system that does not tax dividend, interest payments and capital gains.

The Armey/Shelby Flat Tax, does not tax the earnings on those investment vehicles as such gains are all exempted. This decreases the marginal tax rate on those savings to zero wiht no visible tax on consumption for the folks these vehicles are mainly useful to, the lower income groups.

The consequence according to Jorgenson and demonstrated in his models, is to encourage more consumption and lower investment/saving as a consequence. Encouraging a trend that portends some rather negative consequences for the economic future of this nation.

[Dimples]

Jorgenson ... again??? Don't you have anything more recent? That's a little dated isn't it? (Wow, I'm beginning to sound like YOU!) As I said before, don't complain, as you often do, when others use such "dated" material.

More to the point, did I say anything about progressive Flat Tax proposal?

No. I did not. As I said, those studies are irrelevant; they don't model what I suggested at all. Your insistance that they somehow hold sway on completely different implementation schemes underscores my claim that you can't seem to compare apples to apples. You'll use any old (literally) study that supports your assertions, even if that study has nothing to do with the conversation.

You might try an open and visible tax on items of consumption for one. Works great to provide that extra motivation to chose between consumption today or socking earnings away against the future after they grow abit.

More conjecture unsupported by your source ... where, exactly, does Jorgenson claim this? (Hint: He doesn't!)

There is a HUGE disincentive to consumption in the ST modeled by Jorgenson: it raises the marginal tax rate on low income families!

Under Armey-Shelby, consumption rises because the PROGRESSIVITY of the tax makes the marginal tax rate for low income families zero (it has nothing to do with the tax on personal savings and investment ... low income families tend not to have any of that ... or the visibility of the tax. You'll note, but I suspect you will ignore, the fact that that same study did not model the ST with any progressivity; so the marginal rate for low income families under the ST is 15.7% to 21.4% over time ... and consumption falls. Gee, do ya think that raising the marginal tax rate on low income families might eat into their consumption a bit??? just maybe??? What do you think might happen to consumption in a progressive ST (one that lowers the marginal tax rate on low income families to zero ... just like Armey-Shelby, just like the FairTax)? (Hint: It will rise!)

And, if your assertion is true, that purchasing power is increased under the FairTax (which I do not believe happens under the FairTax implementation) then the incentive to consume is increased even more! (But since your study about a significantly different model doesn't say that, you won't even consider that possiblity.)

To suggest that the incentive to invest overwhelms the desire to consume flies in the face of Modigliani's work. Jorgenson made no such claim. You've gleaned that characteristic of the FairTax out of thin air.

If you're going to rely on studies, at least represent them honestly.

Then you trot out the other Jorgenson paper - Baker (don't you have anything else???) - and highlight the performance predictions for a specific Flat Tax. Now you're just being silly. Did I say anything about a Flat Tax???

No! I did not. But you can't seem to accept that. Either you're just being absurd to be argumentative, or you have great difficulty with comparative analysis.

[Dimples]

The Armey/Shelby Flat Tax, does not tax the earnings on those investment vehicles as such gains are all exempted.

Neither does the FairTax.

This decreases the marginal tax rate on those savings to zero wiht no visible tax on consumption for the folks these vehicles are mainly useful to, the lower income groups.

Huh?? It that supposed to be a coherent sentence?

The consequence according to Jorgenson...

No, that would be the consequence according to ancient_geezer. Jorgenson makes no link between the visibility of the tax and consumption. Jorgenson does make a link between progressivity and consumption. From page 26 of the Baker paper:

"While it may seem paradoxical that consumption increases with a rise in the consumption tax, the marginal tax rate for low-income taxpayers is reduced to zero, stimulating consumption."

Again, the ST modeled by Jorgenson RAISES the marginal tax rate on low income taxpayers thereby diminishing consumption. BUT, the FairTax dosen't do that ... it's like Armey-Shelby: it lowers the marginal tax rate for low income taxpayers to zero. That, according to the model you base all you assertions on, stimulates consumption!

Encouraging a trend [increased consumption] that portends some rather negative consequences for the economic future of this nation.

So, given that the FairTax will also stimulate consumption (with all the attendant "negative consequences" thereof) by implementing the same mechanism that Jorgenson blames for the increased consumption under Armey-Shelby, I guess you don't support the FairTax either?

[Dimples]

For what it's worth, a little research into the decline of personal savings reveals some interesting tidbits.

Comparing 1982 (personal savings rate of 11.2% of disposable income and 2004 (personal savings rate of 1.8%)... a decline of 9.4 percentage points

Durable goods consumption rose (mostly automobiles) accounting for 1.5 percentage points.

Medical Care consumption rose accounting for 6 percentage points.

Personal Business services consumption (banking, brokerage, legal, etc.) rose accounting for 2.3 percentage points.

All other consumption combined FELL by 0.5 percentage points.

It would appear that the decline in personal savings is LARGELY due to an increase in the consumption of Medical care and an increase in Personal Business Services consumption due to an aging population moving into retirement.

Since the population will continue to age, Medical care consumption is likely to continue to increase (regardless of the tax scheme.) As the population ages and moves from building assets to consuming assets, personal business service consumption will increase as a % of income (even though they are not working, they will not close their bank accounts or immediately liquidate their portfolios.

Your implication that our declining savings rage is due to "consumption gone wild" doesn't square with the data. As the population ages, two thing will happen: consumption of medical care will increase, and, most importantly, overall consumption as a % of income will increase as more and more of the population stops working, or trades high income jobs for low-to modest paying supplemental jobs to supplement retirement income. They will, however continue to consume. As they move to more negative cash flow positions, the overall savings rate of the country will appear to decline.

That is not a statement of "excessive consumption" or insufficient savings, it's an expected result of an aging population.

[ancient_geezer]

Jorgenson ... again??? Don't you have anything more recent? That's a little dated isn't it? (Wow, I'm beginning to sound like YOU!) As I said before, don't complain, as you often do, when others use such "dated" material.

Where's your more uptodate or relavent study? I waiting to have a look at it.

As far as the current information goes regarding national sales tax variants and flat tax variants, there is plenty coming out now.

The most recent coming from NCPA,

NCPA Study #275, Tax and Social Security Reform
http://www.ncpa.org/pub/st/st275/index.html

with certainly more coming in response to the coming release of the Tax Panel Report.

So show us the more uptodate or relevant modeled studies supporting your conjectures.

 

More to the point, did I say anything about progressive Flat Tax proposal?

No. I did not. As I said, those studies are irrelevant; they don't model what I suggested at all.

Where is the more relavant study? Your conjectures fail to impress.

There is a HUGE disincentive to consumption in the ST modeled by Jorgenson:

 

Absolutely where the problem of negative savings and investment is most critical and where the greatest dependancy on government entitlement programs such as Social Security and Medicare lay. The very areas where government spending is highest and most critical, driving towards collapse of the entire system,

it raises the marginal tax rate on low income families!

As well as everyone else.

However adding a sales tax rebate to the mix changes the distributive effects significantly providing substantantive relief to those same families yet retaining that necessary highly visible disincentive to spend all that one earns rather than save and invest for future benefit.

Until individual savings and private ownership of retirement funds returns, the growth of socialistic programs and ever expanding federal presence is going to continue its path to an evergrowing nightmare.

With appropriate tax and Social Security reform those negatives are significantly reduced.

 

NCPA Study #275: Combining Tax Reform and Social Security Reform

• Without reform, real wages at mid-century will be 10 percent lower than otherwise because of elderly entitlements.
• With the set of reforms proposed here, real wages will be 4 percent higher than otherwise by mid-century and 10 percent higher by the end of the century.

• Without reform, average take home pay for workers will be 26 percent lower by 2050 and 31 percent lower by the end of the century because of elderly entitlements.
• With the set of reforms proposed here, pretax wages are 21 percent higher at the end of the century than would otherwise be the case and the effective average tax on wages falls from roughly 60 percent to roughly 37 percent.

 

• For individuals born in 1980 and newly entering the labor market today, families in the bottom third of the income distribution can expect a 13 percent increase in their lifetime standard of living, compared to a less than 1 percent for those in the middle and a less than 2 percent for those at the top.

• For those to be born in 2030, the gains (relative to what otherwise would have happened) are 54 percent for the bottom third, 27 percent for those in the middle and 11 percent for those at the top.

These are the benefits that accrue with any of several rebated, single rate consumption tax systems coupled with true personal savings and investment incentives. The most pronounced advantages accruing to a retail sales tax style tax system because of its lower costs imposed on business and hence positive effect on household purchasing power and standard of living.

Under Armey-Shelby, consumption rises because the PROGRESSIVITY of the tax makes the marginal tax rate for low income families zero (it has nothing to do with the tax on personal savings and investment ... low income families tend not to have any of that ... or the visibility of the tax.

LOL, keep telling yourself that, the current system is progressive to an extreme for lower income households not taxing interest, capital gains, dividends or wage income with EITC to the point they are actually subsidized.

Unfortunately the savings rate, for lack of any visible disincentive on their consumption looks like this:

 

 

 

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You'll note, but I suspect you will ignore, the fact that that same study did not model the ST with any progressivity;

Ah but other studies have in fact been done specifically for the FairTax provisions in 1997 by Jorgenson applying the same techinques as his Baker study providing similar results.

You will not adding progressivity is at a cost to maximum potential, however the positive effects on providing similar incentives for saving and stronger discincentive to consumption are actually demonstrated in noting the quanititaive difference in results.

Here is text taken from the summary results of that modelling of the fair tax provisions regarding the impact on savings/investment versus consumption, with the addition of progressivity in combination with visible disincentives for consumption.

The specific report is available on email request from AFFT in pdf format.

 

THE ECONOMIC IMPACT OF THE NATIONAL RETAIL SALES TAX
By Dale W.Jorgenson
May 18, 1997
Final Report to Americans For Fair Taxation

INTRODUCTION AND SUMMAY

The purpose of this report is to analyze the economic impact of substituting the National Retail Sales Tax (NRST)for individual and corporate income taxes,the Medicare,Social Security, and FUTA payroll taxes,and the estate and gift taxes.1 I consider a revenue neutral substitution-one that leaves the government deficit unchanged. Finally,I focus on the impact of this fundamental tax reform on economic growth over the next quarter century.

I have summarized my conclusions in a series of charts:

1.The revenue neutral substitution of the NRST for existing taxes would have an immediate and powerful impact of the level of economic activity.The first chart gives a projection of GDP under current tax law. The second chart shows that GDP would increase by almost 10.5 percent in the first year.This increase would gradually decline to a little under 5.4 percent over the next twenty-five years.

2.Taxation of consumption would induce a radical shift in the composition of economic activity-away from consumption toward investment. The third chart shows that real investment would initially leap by a staggering 76.4 percent and then gradually fall to about 15 percent higher than under existing taxes. The third chart reveals that real consumption would initially decline by 9.1 percent. However,consumption would overtake the level under existing taxes within five years and grow rapidly under the NRST.

3.Holding net foreign investment constant,the fourth chart shows that exports would jump by 26.4 percent under the NRST, while imports would rise only modestly. This is the consequence of excluding exports from the tax base while including imports. The initial export boom would gradually subside, but exports would ultimately remain more than 13.3 percent above the level under the current tax system, while imports would fall a modest 0.9 percent below this level.

4.As a consequence of the elimination of taxes on capital income,individuals would sharply curtail consumption of both goods and leisure. In addition,the implied subsidy to leisure time would drop to zero under the NRST; under the existing tax system this is equal to the marginal tax rate on labor income. The fifth chart shows that the NRST would generate dramatic growth in the capital stock and a sharp initial rise in the labor supply that would gradually decline over time.

5.Since producers would no longer pay taxes on profits or other forms of capital income under the NRST and workers would no longer pay taxes on wages, prices received by producers, shown in the sixth chart,would fall by an average of twenty percent.The seventh chart shows that industry outputs would rise by an average of twenty percent with substantial relative gains for investment goods producers.

6.In the long run producers’ prices, shown in the eighth chart,would fall by almost thirty percent under the NRST.In addition,the shift in the composition of economic activity toward investment and away from consumption would drastically redistribute economic activity among industries.The ninth chart shows that production would rise in all industries,but the increase in production of investment goods would be relatively greater.

7.The imposition of the NRST would produce a sharply higher tax rate on consumer goods and services, but the tenth chart shows that the initial consumption tax rate would be twenty-three percent at both federal and state and local levels or only 18.4 percent at the federal level. This would gradually rise over time,but remain below thirty percent or 23.8 percent at the federal level

.

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IMPLEMENTATION OF A CONSUMPTION TAX

In Hearings on Replacing the Federal Income Tax, held by the Committee on Ways and Means in June 1995, testimony focused on alternative methods for implementing a consumption tax.The consumption tax base can be defined in three alternative and equivalent ways. First, subtracting investment from value added produces consumption as a tax base,where value added is the sum of capital and labor incomes. A second definition is the difference between business receipts and all purchases from other businesses,including purchases of investment goods. A third definition of the tax base is retail sales to consumers.This is the definition that underlies the NRST.

*** Snip ***

3. National retail sales tax.Like existing state sales taxes,a national retail sales tax would be collected by retail establishments,including service providers and real estate developers.The actual collections could be subcontracted to existing state agencies. Enforcement procedures would be similar to those now used by the states. To defray the costs of collection at the retail and state government levels,the NRST would rebate 0.25 percent of the tax base to retailers and another 0.25 percent to state agencies.

*** Snip ***

DISTRIBUTIONAL IMPACT

Daniel Feenberg,Robert Mitrusi,and James Poterba (1996) have shown that the “demogrant ” feature of the NRST produces greater progressivity in the distribution of the tax burden.This makes it unnecessary to consider additional policies to enhance progressivity as part of a shift to NRST. However,a very important limitation of this finding is that the impact is purely “static ” and does not include the dramatic gains in the level of economic activity and changes in the composition of this activity.

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Footnotes:

¹ The NRST is described in detail by Laura Dale (1996)

 

And, if your assertion is true, that purchasing power is increased under the FairTax (which I do not believe happens under the FairTax implementation) then the incentive to consume is increased even more!

Rising income over time due to increased investment does lead to more consumption, initially however, investment rises make that possible, and consumption fall significantly. The shift of resources from consumption drives prices down by the amount of cost savings to business and increased production efficiencies that arise assuring a large increase in purchasing power.

Purchasing power however is channeled both towards investment and consumption rather than consumption dominating as it does under the current tax system.

 

 

To suggest that the incentive to invest overwhelms the desire to consume flies in the face of Modigliani's work.

Only your interpretation of Modigliani's work.

Jorgenson made no such claim.

2.Taxation of consumption would induce a radical shift in the composition of economic activity-away from consumption toward investment.

With quantitative demonstration of the effect in his IGRM implementation.

The third chart shows that real investment would initially leap by a staggering 76.4 percent and then gradually fall to about 15 percent higher than under existing taxes. The third chart reveals that real consumption would initially decline by 9.1 percent. However,consumption would overtake the level under existing taxes within five years and grow rapidly under the NRST.

 

You've gleaned that characteristic of the FairTax out of thin air.

Another of your speculations that fails for lack of foundation.

[ancient_geezer]

The Armey/Shelby Flat Tax, does not tax the earnings on those investment vehicles as such gains are all exempted.

Neither does the FairTax.

Ahh, but the FairTax visibly taxes consumption providing the demonstrated disincentives to spending and incentive to save/invest above, where the Armey/Shelby Flat Tax does not visibly tax consumption generating opposite results on investment and consumption.

The consequence according to Jorgenson...

No, that would be the consequence according to ancient_geezer.

Jorgenson 1997: "2.Taxation of consumption would induce a radical shift in the composition of economic activity-away from consumption toward investment."

Your implication that our declining savings rage is due to "consumption gone wild" doesn't square with the data.

"Too much consum'n go'n on" it looks to me and squares with the data fine:

[Dimples]

1. I never claimed to have a study, but since you asked, how about Jorgenson 97 ... the one you just used ... where he says:

4.As a consequence of the elimination of taxes on capital income, individuals would sharply curtail consumption of both goods and leisure.

So then I was right: eliminating taxes on personal savings and investing WOULD increase the savings rate! Just don't complain about the date of the study; if it's good enough for your arguments ... ;-)

2. For some unknown reason you've chosen to take my rhetorical suggestion to phil_will1 out of context and hammer on it in an even more irrelevant context: that of a Flat Tax. I never said ANYTHING about a Flat Tax. Why do you keep harping on Flat Tax schemes?

3. You always complain about "dated" studies when someone else uses them but you use them yourself almost exclusively? Why do you keep complaining about it?

Absolutely where the problem of negative savings and investment is most critical and where the greatest dependancy on government entitlement programs such as Social Security and Medicare lay. The very areas where government spending is highest and most critical, driving towards collapse of the entire system...

And the FairTax does nothing to decrease dependency on government, nothing to reform Social Security or Medicare, and nothing to reduce spending in this "highest and most critical" area.

it raises the marginal tax rate on low income families!

As well as everyone else.

But as Jorgenson said, its the marginal tax rate on low income families that is to blame raising or lowering consumption. You just choose to ignore that fact when it's inconvenient.

However adding a sales tax rebate to the mix changes the distributive effects significantly providing substantantive relief to those same families yet retaining that necessary highly visible disincentive to spend all that one earns rather than save and invest for future benefit.

So which is it? will they spend the demogrant or save the demogrant? You sound confused. Jorgenson claims they will spend the demogrant. Again, he makes no connection between visibility of the tax and consumption.

The rest of your gobbledygook about Social Security reform and socialistic spending is yet another of-topic rant having nothing to do with the tax scheme, my original comments, or the phase of the moon. Try to stay on topic, please.

LOL, keep telling yourself that [that consumption rises because the PROGRESSIVITY of the tax].

Jorgenson said that. I just cut and pasted his remarks to remind you. What's sad about your debate technique is that when presented with a direct quote from one of YOUR sources that contradicts your assertions, you pretend it either doesn't exist or that it was made up. You did that when I caught you misrepreseting Payne, and you're doing here with Jorgenson. Again, if you're going to use a study, then represent it honestly.

[Dimples]

Ahh, but the FairTax visibly taxes consumption...

Where does Jorgenson (or any other economist) make the the claim that visibility is the disincentive?

You keep claiming that purchasing power goes up, and prices are at least neutral. If that is the case, the tax itself, at a minimum, has a positive effect on consumption: goods cost relatively less even with the tax; that's hardly a disincentive to consume. (Again, I don't buy the assertion about neutral price behavior, but you are arguing out of both sides of your mouth on that one.) You seem to be claiming that people will eat less, drive less, buy fewer new houses and cars and clothes ... all because the tax is too high ... even though these items are more affordable. That's silly.

"Too much consum'n go'n on" it looks to me and squares with the data fine ...

As usual, when presented with data that does fit your perception of the world, you ignore it. You've got a graph that you like, but you apparently haven't bothered to investigate what's behind the graph (I notice this time you left out the small print)

To recap: the increase in consumption is attributable to an aging population consuming increased levels of medical care and personal business services. The decline in the savings rate is do to three things: the increased consumption noted above, an again population transitioning from accumulating assests to consuming assets; and adding a third component, the failure of the data on savings rate to take into account capital gains (either realized or unrealized.) The "savings rate" as currently calculated, is not a very good indicator of wealth or capital formation.

But I notice you completely ignored that data.

[ancient_geezer]

So then I was right: eliminating taxes on personal savings and investing WOULD increase the savings rate! Just don't complain about the date of the study; if it's good enough for your arguments ... ;-)

Ahh, you missed the other half that is necessary I noticed, for the equivalent Flat Tax study shows the merely not taxing capital income is insufficient. It take both not taxing capital income and taxing consumption to obtain the overcome the propensity to spend ones income regardless of how it may be derived.

As is demonstrable in comparing the result of using the revenue neutral version of the Armey/Shelby Flat Tax:

Jorgenson '98 Flat Tax study:

 

http://www.economics.harvard.edu/faculty/jorgenson/papers/baker.pdf

• " Figure 6 compares the impacts of the two tax reform proposals on consumption. The impact of the Flat Tax in 1996 is to increase consumption by 3.5 percent, relative to the Base Case. This impact gradually diminishes over time, falling to 1.3 percent by 2020. While it may seem paradoxical that consumption increases with a rise in the consumption tax, the marginal tax rate for low-income taxpayers is reduced to zero, stimulating consumption."

• " Figure 7 compares the impact of the two tax reform proposals on investment. The impact of the Flat Tax in 1996 is to depress investment by 8.6 percent, relative to the Base Case. Investment recovers over time, eventually reaching a level that is only 1.7 percent below the Base Case in the year 2020. "

 

With a revenue neutral FairTax implementation:

Jorgenson '97 FairTax study for AFFT

• The third chart shows that real investment would initially leap by a staggering 76.4 percent and then gradually fall to about 15 percent higher than under existing taxes.

• The third chart reveals that real consumption would initially decline by 9.1 percent. However,consumption would overtake the level under existing taxes within five years and grow rapidly under the NRST.

 

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. I never said ANYTHING about a Flat Tax. Why do you keep harping on Flat Tax schemes?

The single rate ArmeyShelby Flat Tax system is comparable a single rate retail sales tax with progressivity. Equivalence through the relation of

consumption = income - investment.

The FairTax system visibly and directly taxes consumption on the right hand side of the relation.

The FlatTax system indirectly taxes consumption by taxing labor income excluding income from investment and savings.

The studies exist for both using the same algorithms and models hence provide a unique capactity to isolate the effect of tax consumption visibly through retail sales vs taxing consumption indirectly through non-investment income.

As can be observed above where progressivity is present in both systems there remains the effects on investment and consumption are in opposition to each other. The difference clearly demonstrated as the effect Jorgenson's demonstration that :

"Taxation of consumption would induce a radical shift in the composition of economic activity-away from consumption toward investment."

For the FairTax case taxing consumption directly, and for the FlatTax case which taxes consumption indirectly as would be the case for your speculations with phil_will1:

"While it may seem paradoxical that consumption increases with a rise in the consumption tax, the marginal tax rate for low-income taxpayers is reduced to zero, stimulating consumption."

 

Obviously more is in operation than merely progressivity as the Armey/Shelby Flat Tax is just as progressive as the FairTax system.

 

LOL, keep telling yourself that [that consumption rises because the PROGRESSIVITY of the tax].

Jorgenson said that. I just cut and pasted his remarks to remind you.

Obviously missing a lot of context and background regarding the statement.

You did that when I caught you misrepreseting Payne

Misrepresenting Payne? hardly. I would suggest you take another look, as Payne clearly compiles the most comprehensive measures of total tax-related overhead costs on the economy that exist. Far beyond the mere accounting compliance costs (the least of the impacts on price) that most restrict themselves to.

and you're doing here with Jorgenson. Again, if you're going to use a study, then represent it honestly.

Interesting isn't it, how it all breaks out when results of equivalent tax systems can be so divergent on the mere mode on which the tax is actually collected. Flat Tax from the indirect income side, FairTax from the direct and visible retail consumption side.

Both single rate, both progressive, but bottom line directly opposite in effect as regards consumption and investment arising out of the visibility of the legal incidence of the tax, what it is visibly and psychologically linked to in the mind of the consumer/income earner pay the tax in either situation.

The only persons here mis-representing results and warping conclusions in this matter would appear to be on your side of debate.