Posted on 01/28/2006 1:15:41 PM PST by Eaglewatcher
You and I must have read a different book, to my eye this is the way that the plan is being sold to the masses.
Do you agree with YN that costs and prices are unrelated?
Yes, of course I agree with YN that prices are set by the markets willingness to purchase an item regardless of what it costs to make said item. Prices are based on what value the market places on items and what competitive options exist. The cost is only relevant to whether the seller makes money, and whether he remains in business.
This is basic stuff Phil, you shouldn't have such trouble understanding.
Seller: I have these fine shirts for sale-- $500 each.
Buyer: That's a lot for a shirt. Fred's down the street has shirts for $25.
Seller: Does Fred pay his employees $100 per hour and give them 8 weeks vacation a year? Does Fred serve caviar and champagne for lunch free of charge for his employees every Friday? Does Fred have more employees than are needed? My costs are higher so you'll just have to pay my price.
Buyer: Sure, now that you put it that way, no problem.
Nice follow up. You 59 post reminded me of the dumb-down indoctrination proliferation in government/public education system. The SQLers seem in lock-step with that.
If removing all taxes would save those jobs, then I would vote to remove all taxes.
A larger sales tax on the product when sold by the dealership would take that cost off the backs of the companies.
However, I assume they're putting that tax into their product in the first place.
Selling more cars means lowering the total end price of the car. No matter which tax system you use, you have to get rid of the tax to lower the price.
"That isn't, and wasn't the main thrust of the book"
"You and I must have read a different book, to my eye this is the way that the plan is being sold to the masses."
Note to lurkers: notice how subtley RFG appeared to contradict my statement when in fact he didn't. He shifted the debate point ever so slightly when he realized he had lost the original point. This is typical SQL strategy.
"Prices are based on what value the market places on items and what competitive options exist."
Well said!! Thank you. That is another way of saying that there is a fundamental difference between individual uncompetitive producers and the price structure of an entire industry (which is what I posted above).
"This is basic stuff Phil, you shouldn't have such trouble understanding."
I agree with this statement and I agree with your understanding of how a free market economy works. Your efforts to support your SQL buddy in his distress and pretend that he hasn't backed himself into a corner are commendable.
Just run the number for yourself, use a 10% example if you like for a price drop. So many, supporters and defenders of the status quo(income tax) have said a 22 to 25% price drop was too much and was wrapped up in a salary decrease(only a recently revealed and mysterious point made by Jorgenson)
and messages have been mixed by some fair Tax supporters.
A reduction in salary by 7.65% is not going to be sellable.
Nor is the Fair Tax plan going to work or pass if some insist that workers will get the 7.65% paid by the employer.
I don't beleive the bill supports either of those ideas.
The core and original idea is that you are replacing the current system with a Consumption tax.
If you were hired with a 50,000 salary and typically have a 15% tax dedcution for federal income tax and a 7.65% payroll tax taken out each week. Than you took home In simple terms $38,675.(depending on # of Dependents filed) Of course and honestly there are still State deductions and after filing taxes your refund check may offset that marginal tax rate number.
The Point is that under the Fair Tax you will Take home $50,000 and not have to wait to file a tax return to get a refund. The Fair Tax concept that will pass is 100% of your paycheck coming home with no federal deductions.
The Fair Tax plan that will pass is not $50,000 plus the employer portion of payroll tax nor is it $50,000 minus the employee portion of the payroll tax.
Average family will have a 30% increase in take home pay and than pay a 30% national Sales tax on new products and services. (23% inclusive rate) At a minimum, it is a wash and greatly simplifies the tax code and provides a series of other benefits. ( i.e American Manufacturing investment)
Used items - no tax; Savings (with no tax gimmicks)will pay no tax on principal or interest. So FAmilies can save for a new home; retirement; college education or pay for health insurance or Child care more easily. They have more money each month to save or to spend. More money to take home and decide what they want to pay tax on and what they can buy and not pay tax on.
It took this family earning $129 to bring home $100 and buy $100 worth of product under the income tax Be conservative and say a 10% price drop when the Fair tax works through the supply chain.
$100 worth of product drops to $90. And with the Fair Tax added in it goes to $117. However to pay for the $117 worth of product, the Family is bringing home $129. They are $12 ahead.
Now, you can debate arguments and differences between effective income tax rates and net effective rates for the Fair Tax. And that is fine but keep Apples to Apples and Oranges to Oranges.
The above is the apples.
to go net effective, you now would have to include the Prebate. ( i.e. Family of 4 receives $492/m)
So the Economic model is simple, it is not a white paper yet but this board is definitely well informed and able to follow the example above.
As armchair economists we should be able to agree that a 10% price drop with the Fair Tax is plausible and probable.
If not Why Not?
A corporation may choose not to lower prices? True
It is likely Price competition will affect that decision and business could lose market share? Also TRUE.
Therefore it is likely that in time and due to competition prices will drop? I beleive that is true.
Examples of competition and price drops:
Last summer's "employee pricing" with the major car producers. One started it and they all joined in. Why? To retain market share.
Will every product drop 10% - NO. But on average across the board of typical purchases by families the average price drop could easily be 10%- IMHO.
Your description is of a world in which all dollars that are already held by people, and where the taxes have already been paid, are devalued by 30% in the blink of an eye.
They don't "collect" money. They get a market price for their goods and services. If it covers their costs, they make a profit and pay taxes - if it doesn't cover their cost (like GM & Ford) they lose money and don't pay taxes. GM & Ford's prices had absolutely nothing to do with their taxes and very little to do with their costs.>>>>>>>>>>>>>
Obviously businesses sell below cost sometimes and yes, the market determines the price they can get but that does not mean that costs have nothing to do with the price. The market price must cover costs for at least the lowest price producer or the product will not be available. Also, there are taxes that must be paid regardless of whether a company makes a profit. The employer's portion of the social security and medicare tax must be paid on all wages and salaries, failure to do so can result in imprisonment. The fact that a company loses money does not mean that they pay no taxes. The fair tax proposes to eliminate this tax, doing so would allow the employee to take home his current gross with no tax deductions while still giving a substantial tax reduction to the employer, as I understand it unemployment taxes would also not be required any longer, this is another tax that must be paid by the employer whether losing money or not. You seem to ignore all this and grossly oversimplify the matter. That is why I say you either have an ax to grind or no understanding of business.
That is why I say you either have an ax to grind or no understanding of business.
It's self-perfidy. Go figure. Many people are their own worst enemy.
This gives the employer a 7.65% reduction in the cost of his labor costs (up to the first $94k salary per employee). A far cry from 22-23%.
as I understand it unemployment taxes would also not be required any longer,
You understand wrong on this point, but it is negligible anyway.
Under the FairTax, either salaries are cut to about current takehome levels and prices can stay about the same, or salaries and prices go up when the 30% Fairtax is included.
Let's get back to American Manufacturing?
If Ireland has the lowest Corporate tax rate in Europe(12%) and seems to have the least unemployment and the greatest GDP growth in Europe?
Than what can we do to promote American Manufacturing and Job Growth on Us Soil.
Others have quoted an old but probalbly still true survey that said major corporations would move not only manufacturing to the US but corporate headquarters if our tax laws were different.
Why are there reported trillions of dollars held in Offshore destinations like the Bahamas or the Caymans?
If under the Fair Tax, we eliminated payroll and corporate income tax we would have the lowest tax rates and would be a tax free zone for both manufacturing and for corporate headquarters.
Detractors point to; it makes no difference if Ford is losing money. That may be true in a short term on corporate income tax only. But we are also talking investment in capital and investment in Ford for the Long term. It will become profitable again.
But the Fair Tax affects Investment capital and the return that investors get on that investment. If the tax on that investment is ZERO and allowed to grow or be sold and reinvested with no tax consequence, than investment dollars will flock to US Shores.
Trillions in Offshore individual and Coroprate holdings could return to US shores - Tax Free for investing.
That means more manufacturing plants built and jobs to go with it. That means economic growth that can help grow our economy out of deficits both for the buduget and for the trade deficit. Lower taxes worked for Ireland why not for America??
The Long term benefit to the American Economy is a major reason to look at the Fair Tax and it is only one of the Top Ten Reasons to support the Fair Tax.
http://fairtaxreform.blogspot.com/2006/01/top-ten-economic-benefits-of-fair-tax.html
Replacing the current tax system with the FairTax (an NRST) would send the US economy into orbit. There can be no honest freedom without economic freedom. United States holds the title of being the freest country in the world. Replacing the current tax system with an NRST would have major effects on other governments and would cause a wave of economic freedom to sweep the world.
Power to The Individual.
Not at all, but your idiotic post contained nothing else requiring a response.
And I doubt any FairTax supporters expect any "converts" who are nicely ensconced in their own little income tax niche. Certainly I don't and I note you haven't explained your affinity for our present system nor explained how it would improve, for example, assistance to exporters with border-adjustable removal of taxes embedded in prices.
Shucks, you caught me ... that's my OTHER screenname:-)
"On principle, honest principle should trump union rules and law (see tag line), Employer should have the option of offering non-union employment and employee should have the option to chose. Let free market competition work. Neither union nor legislation should have monopoly-force power."
I agree, and that is what "right to work legislation" would give us. As it stands today, no newly hired employee has the ability to opt out of the collective bargaining agreement. They are forced to pay dues and join the union. If the choice was offered, then the employee could be empowered to act as an individual.
It would be wild speculation on my part to even guess what percentage would opt out vs. join the union.
This gives the employer a 7.65% reduction in the cost of his labor costs (up to the first $94k salary per employee). A far cry from 22-23%. >>>>>>>>
I never said otherwise, I only said that you seemed to be ignoring that any taxes which are contained in prices would be eliminated, 7.65 percent is also a far cry from zero. There would also be enormous savings in compliance costs, whole armies of computer systems analysts, bookkeepers, accountants etc. could turn their talents to more productive uses, the cost to the government to collect taxes would be greatly reduced. There may be real problems with this tax but the arguments you are using don't hold water in my opinion.
What do you think would be the effect on retail sales of this tax? I can imagine a sharp drop, at least in the short term, due to the fact that taxes are not paid until money is spent. If I can postpone a purchase for another ninety days and draw tax free interest wouldn't I be likely to delay buying anything until I must have it? Would the resale value of the car in the drive way go up? Apparently the tax would not apply to sales between individuals and if so it would seem that the value of all used merchandise sold by individuals would go up by some percentage of the tax on new items.
I admit that it seems to contain an element of socialism in that the tax rebate would apparently go to families who have little or no visible income, this could mean that drug dealers and others who operate on a strictly cash basis might be collecting a monthly stipend from the taxpayers. This is the sort of question that concerns me a lot more than some of the other things I see mentioned.
Begging your indulgence, it seems that in my reply to you I inadvertently quoted something that was not said by you at all but by someone else, apparently you have about the same opinion anyway so I suppose there is not too much harm done but it was careless on my part.
It would be wild speculation on my part to even guess what percentage would opt out vs. join the union.
My educated guess is that over time union representation would decrease to nil. I base that on: 1) the world's largest retailer--Wal-Mart, 2) the erroneous union premise that a person is unqualified/incompetent to negotiate their own side of the deal, 3) national trend.
"I admit that it seems to contain an element of socialism in that the tax rebate would apparently go to families who have little or no visible income,..."
Actually, the prebate goes to everyone. Not just select families. Admittedly, I would rather not see this as part of the bill, but I do understand the politics of it.
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