No one has suggested the PCE counts business-use purchases. Quite, the contrary. It is precisely because the PCE excludes Business-Use purchases that the example works.
PCE expressly excludes Business use purchases by methodolgy. Any purchase by a business is considered to be business use and an investment not personal consumption by NIPA/
That PC purchased by a business but used for personal consumption is not in PCE it is considered investment not personal consumption of PCE.
http://spruce.flint.umich.edu/~mjperry/Unit10.html
"NIPA arbitrarily assumes: All household spending is PCE except spending on housing. All business spending on final goods is considered Investment. "
That computer bought by a business for its employee to take home is assumed to be an investment by NIPA and is not included in PCE at all.
One of 7our examples is that of a business purchasing for an employee that he might avoid/evade taxes, such a purchase is not entered as PCE in the income/payroll tax case, (when such compensation effects avoidance of income taxes on the value of the PC), and it is not entered as PCE for the situation of the NRST.
Your other cash under the table scenario then purchasing the PC in open market, leaves the numerator (i.e. government revenues lower than they would otherwise be, thus the rate calculated against PCE remains revenue neutral with respect to revenues that are actually collectible.
You overlook that the one receiving the under-the-table cash payment is indeed a business, if an under-the-table cash transaction is in the works by such a business to evade the income tax, it is by no means a stretch that his purchase of a personal use PC would be as a business expense achieving even greater worth and scope as a means to evade under the current system. That PC would not be counted under PCE as it is most likely declared as a deductible business expense item used to minimize taxible income arising from tracible business sales of that rather nefarious tax evading business person.
You hypothetical is marginal at the very best light, and easily offset by other transaction that obviously must go the otherway in folks erroneously declaring less business expense than they otherwise qualify for in tax deductibility of the income/payroll tax system.
Sorry, just don't by your marginal hypotheticals at all when the obvious cases abound all around us in the current system that act to reduce PCE below its real value rather than increase it. It is far more probable for PCE to be lower than real taxable consumption, than it is for it to be higher by a very wide margin simply due to the lacks in methodology for measurement of PCE to begin with. The static revenue neutral tax rate computed from the PCE base represents a clear upper boundry to the tax rate for the NRST with much greater certainty than it represents a lower boundry.
Uhhhh, isn't that exactly what he said?No one has suggested the PCE counts business-use purchases. Quite, the contrary. It is precisely because the PCE excludes Business-Use purchases that the example works.PCE expressly excludes Business use purchases by methodolgy. Any purchase by a business is considered to be business use and an investment not personal consumption by NIPA/
Now your torturing the example to make it fit your rather narrow view of the world.
First, there are not two examples involving the purchase of a PC. It's one example of how behavior under the income tax differs from behavior under the FairTax for ONE SPECIFIC INDIVIDUAL. If the individual is governed by the Income Tax, he buys the PC himself; if the individual is governed by the FairTax he works a deal with his employer to fake a business purchase. No individual, in any of my examples, has his employer buy his PC when governed by the Income Tax, yet you persist in pretending he does.
Second, the amount of Income Tax being replace by the FairTax is not hypothetical. It is and actual amount already specified (just like the PCE.) That number is not changed by my example of the income tax evader. He exists today ... and he bought himself a PC that was counted as in the PCE figure used by the AFFT to calculate its rate; it was not a business purchase; and it was bought with untaxed money; and his non-payment of tax resulted in the actual Fed tax receipts that are used in the AFFT calculation of the FairTax rate. No numerators were harmed in the example ... only the denominator was.
Third, you're completely in fantasy land to suggest that such altered behavior (conscious , with intent to evade, by an individual with a history of evasion) is "light" and "marginal". IT'S WHAT THE CONSCIOUS EVADERS DO !
And you're just grasping at straw to suggest this activity is offset by accidental under-declaration of expenses by businesses. If ANYTHING, business who under-declare will do so equally regardless of the tax system. The incentives are the same and unaltered by the FairTax.
You've got it EXACTLY BACKWARDS!
Did you actually read the explanation you posted about what the PCE does NOT measure? Are you now suggesting that the FairTax aims to tax the value of people cooking meals in their own homes or painting their own houses?
Man, your getting downright silly in your attempt to defend the AFFT tax base. In describing the PCE, you've gone from "everything is fully accounted for, so it can't be less" to "there's so much unaccounted for that it's quite probable it will even get bigger!"
What a crock of horse dung.