Posted on 01/28/2006 1:15:41 PM PST by Eaglewatcher
"Hmmm...why didn't they reduce their prices to only make the profit they wanted? It's almost as if they were trying to make as much money as they possibly could without regard for all those taxes they are going to pay. Silly corporation!"
You think that contradicts my position? It doesn't. In fact, I have always said that businesses exist to maximize profit; however profit maximization over the long run is not synonymous with price maximization.
If you will note from my prior post, something similar happened to the soft drink companies in the short run.
Better get your coffee, YN, you aren't on top of your game yet.
The dollars already held are mostly in tax deferred investments like IRA and 401K plans. All of which are dollars that would be taxed under the income tax system.Those dollars would be taxed at a much lower rate than the 23% the FairTax would charge on them. Would it surprise you that the median (average of middle quintile) total effective federal tax rate in 2002 (minus excise taxes - the FairTax doesn't replace those) for Elderly Childless Households was 5.4%. The average was only 14.3% - and that's skewed because of the extremely high income for the top quintile.
You're kidding, right? As a retired Fortune 500 financial executive I have zero interest in reading anything Boortz writes about tax policies. He's convinced me via his radio comments he knows nothing about how corporations work. To give him the benefit of the doubt I'll assume he simply honest and ignorant and not in it for the money he's making by selling books to people even less informed than he.
Off the top of my head, McDonald's and Wal-Mart demonstrate that to be true.
Do you have a study showing what percentage of money people have in after-tax savings, brokerage and investment accounts, ROTH IRAs, and home equity, and forms of cash? as compared with the amount in IRAs and other taxable retirement accounts?
A conservative price drop of 10% means only a net increae of final price with tax of 17% which is certainly offset by the elimination of the income tax on those IRA and 401K investments.
But not for any money where taxes has already been paid-- this money gets hammered under your variant of the Fairtax plan.
Charmed, I'm sure.
And furthermore, I don't think that most retirees pay anywhere close to 17% federal taxes on their withdrawals from retirement accounts.
No.
Why would you feel it is a fair comparison between an entire industry revolving around our tax code and 2 specific entities of another industry?
Because the whole thesis of the thread is that we need to junk the current tax structure to something far more simple in order to bail out Ford and Delphi. (Yes, I expanded Delphi, a former GM sub, to include all of GM in an earlier post. Scratch out GM and write in Delphi if that bothers you - it doesn't change the basic argument).
If you do junk the current tax structure to something far more simple, you risk throwing over a million folks out of work. The point I raised is whether it benefits the economy to throw over a million out of work to save the jobs of a couple of hundred thousand.
Fair taxers may be able to make a logical case. They haven't here.
I used to work in the soft drink industry. The CEO had a long history in that industry. He told the story about how for many years conventional industry wisdom was that soft drinks were a substitute for water and that the American people wouldn't pay very much for them. Soft drink prices had been stuck at 10 cents for years and the bottlers were concerned about volume going down if they raised their prices. Then at some point (in the 60s, if memory serves), there was a crisis in sugar and the price went up. Since sugar was the major component cost-wise in soft drinks at that time, 10 cents no longer covered their costs. They had to raise prices to 25 cents almost overnight. A funny thing happened - volume went down very little. When sugar prices went back down, the bottlers didn't reduce prices immediately and made a killing. Over time, of course, competition restored a normal equilibrium. Just think - there are thousands of people out there who think that soft drink prices were raised back then because sugar prices went up, and now we learn from YN that the two had nothing to do with each other, that it was a total coincidence.Just curious, why didn't prices come down after costs went down? What happened is the soft drink companies, all working at the same time, were able to change the market. They could have done this without costs going up (it's called collusion and we have a whole division in the DOJ to fight it). When costs went down they were selling into a market that was willing to pay the increase price and the soda companies were more than willing to take the extra money as profit.
however profit maximization over the long run is not synonymous with price maximization.Never said it was.
One of my favs is Boortz claim that corporations "don't pay taxes" meaning they pass the cost of taxes on the consumers. Which is why all large corporations spend millions of dollars and great effort in their Tax Departments ... to reduce those taxes.Just to clarify, are you saying corporations don't pass the cost of taxes on to the consumers?
Yes. That isn't a tax issue, however. It is in large part a free trade/fair trade issue. Let's see if I can get all of the zeros in place for our 2005 trade deficit with China.
$185,326,500,000.00
That isn't tax policy at work. That's slave labor. That's manipulated exchange rates. That's an open economy trading with a closed economy. (Source of stats: http://www.census.gov/foreign-trade/balance/c5700.html#2005
Since you all want an economic policy that benefits foreign trade, are you all really saying that you want to impose Communist Chinese economic and tax structures on the US?
Here's the top 10 list for trade deficits for 2005.
China (about equal to 2, 3, and 4 combined)
Japan
Canada
Germany
Mexico
Venezuela
Nigeria
Malaysia
S. Korea
UK
Top surplus appears to be with the Netherlands. So much for superior EU tax policies driving trade.
"They could have done this without costs going up (it's called collusion and we have a whole division in the DOJ to fight it)."
They could have but they didn't, probably because, as you point out, it's illegal. If you have evidence to the contrary, please post it.
The point is that the soft drink companies did exactly what you and your SQL buddies have been saying never happens - they responded to higher production costs with higher prices for their end product.
Again I will say that there is a fundamantal difference between inefficient individual competitiors in a marketplace and a shifting of the cost structure in an industry.
This has been fun, but I have to run. You and Louie and your SQL buddies go on trying to convince people that costs and prices have no relationship because acquiescing on that simple economic principle undermines much of your criticism of the FairTax. You complain about FairTaxers attempts to "marginalize" you when you do a much better job of that than we could ever do.
You didn't answer the question of why prices didn't go down when sugar prices went down.
"Top surplus appears to be with the Netherlands. So much for superior EU tax policies driving trade."
Man, these SQL debate tactics are getting old. You set up a straw man argument which implies that one of two states of nature exist:
1. either tax policies are the only determinant of trade imbalances, or
2. tax policies are not a factor in trade
Then you prove that other factors may be influential and this means that #1 cannot be true; therefore, you have proven #2. The problem is that I never said that tax policies are the ONLY factor contributing to our trade deficit. Any reasonably intelligent person can see your desperation in characterizing my position in such a way and then knocking your own strawman down.
"You didn't answer the question of why prices didn't go down when sugar prices went down."
I don't know that they didn't go down; they just didn't go down immediately. It takes time for competitive forces to work in the marketplace.
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. >>>>>>>>>>
The maximum price is set by the market, the minimum that is possible is determined in the long run by costs.
The FairTax may not be perfect, but it is a huge improvement over the current system and significantly better than alternative reform proposals. For many of us, that is good enough to get our support.>>>>>>>>>>>>
I will support it in a heartbeat, I just have some questions about the details and what the practical effects will be. Some have interpreted the bill to mean that there would never be any tax on sales of used items of any kind, even if sold by a business. If this were the actual case I think I would instantly go into the business of buying and selling used furniture or something similiar, I have experience in this sort of thing already. I suspect that in reality sales between individuals would not be taxed but sales by businesses specializing in used items would be taxed.
Let's examine this falacy: Your prototypical family earn $50K per year. According to Tax Stats for the 2003 tax year, filers earning from $30K to $50K paid an average of 6.8% of their gross as income tax. Filers earning from $50K to $75K paid 8.8% of their gross as income tax. Clearly, the prototypical $50K filer paid no more than 7% to 8% of their gross as income tax. Presuming that $50K filer earned all income from wages, they paid another 7.5% in FICA taxes. That brings the total tax burden for the prototypical $50K filer to no more than 15.5%; take home pay is $42,250.
If they bring the entire gross home under the FairTax, they will see a take-home pay increase of 18% ... not the 30% you keep falsely presenting. You again are confusing (perhaps purposefully) marginal tax rate with effective tax rate.
Another fallacy. No one, under the current system, must wait to file to get a refund. All one need do is claim an appropriate number of withholding allowances with their employer to avoid improper withholding.
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