Your "realistic illustration" is anything but Nightie. You've obviously chosen a set of conditions (including the spreadsheet layout itself) that intentionally overstates costs so that profits will be reduced, thereby reducing taxes paid.LOL! I used the =RANDBETWEEN(-10,30) function in Excel and divided it by 100 to give me a gross profit margin between -10% and 30%. That means the average profit margin on a number of runs would be 10%. I did manually adjust one, the negative one closest to 0, and set it at 0% so there would be one company breaking even (companies do break even in the real world). The average net profit margin for Fortune 100 companies was 6.3% in 2005. In your example, you set the net profit margin for every company at 33%! I think it's obvious my example is more realistic.
And yes, certainly if there are no profits or there is a loss there will be no taxes paid BY THAT BUSINESS. The costs that have cascaded and embedded to that point, however, will still remain in the items involved as they move to other levels.But somehow they weren't able to pass all their costs along in their prices. I guess they should have gone to the Pigdog School of Economics and Truck Driving.
And, if additional levels are involved instead of the 6 chosen to present the illustrative example, you'll find that the cascading and embedding picks right back up again.Additional levels won't matter. For example, if the average profit margin is 10% and the tax rate is 33%, taxes will 3.3% of sales regardless of the number of levels.
So while the "Accumulated tax as % of price" (which in my example is "tax cost as % of sell price") appears to fluctuate in your example, it only does so because of the carefully-chosen marginal points used.Those "carefully chosen marginal points" were randomly generated!
Your derivation of "cost of value added" appears both arbitrary and inconsistent from level to level - it makes no sense.That was a random percentage, too. I multiplied the input by that percentage (10%-110%) to get the "Cost of Value Added." Some levels add a lot of value, some add very little - just like the real world.
The poorer performing businesses are adding less value proportionately than the more successful ones; perhaps that's why they're clearly going out of business - all 4 of them.Huh? The profit margins were completely random except for the one breaking even. The one that broke even added almost as much value as the one that made the most profit! What the hell are you talking about? And only one is losing money (lots of companies in the real world lose money; e.g. GM) - and they may turn a profit the next year. Who knows?
More than that, even though you have basically chosen 4 of the 6 levels as being failing companies,Failing companies!?! Only one is losing money, you idiot! Do you think a company that has a net profit margin of 4.9% is failing? You may want to tell Wal-Mart. Their net profit margin last year was 3.7%.
there will be few companies even at what you call a 4.9% "net profit margin".LOL! You are really flaunting your ignorance now. Dell's net profit margin was 6%. Net profit margins in the 4.9% range are extremely common. Do you really think every company makes ~33% profit margins? Only a few companies, like Microsoft, can do that on a regular basis. Hell, ExxonMobil had more profits than any company ever last year and their net profit margin was only 10.8%!
You spreadsheet example has changed the entire example and only illustrates that failing businesses (4 of the 6) pay little or no tax.Most business pay very little tax when compared to revenues. Pick a company and go look at their annual report. (I'm sure you'll pick an atypical company.)
They also will not be in business long at that rate. A 4.9% "net profit" (your spreadsheet description) really represents a markup (as used in my spreadsheet) of about a little under 9% which will be untenable in the real world.That's gross margin. You "marked up" the cost of inputs. Your businesses had no costs of production or operating expenses whatsoever. I'm not sure who you think is doing the markup at those companies because they don't have any labor costs. The average gross margin for the Fortune 100 companies was ~10%. Most companies would be very pleased with a gross margin of 9%. I don't know why you think a company with that type of profit is "going out of business." Why would they? They are making money.
As it is your example means nothing at all except as an example of your cleverness in devising a spreadsheet to minimize certain values (and some of those are incorrect as we've seen). If I were grading your effort in class, Nightie, I'd give you an F- and send you back to Business 0.000001.LOL!! I think it's very clear who has a better understanding of business in the real world. You may want to spend some time going over some income statements of real companies. You seem to be totally clueless of how things work in the real world.
You apparently think that profit margins are set by spreadsheet manipulation so that people don't have to make decisions. However as I said originally the example I presented was to illustrate the mechanism of cascading and embedding taxes which it does more clearly that your pathetic attempt to give a "realistic illustration" using unrealiatic means (spreadsheet functions).
All you're saying is you picked numbers out of the air until they satisfied the objective you had in mind, And the taxes embedded in a thing at a given level are not removed as the thing continues on to other levels; they are still embedded (which is part of the reason the choices you made break even or lose money).
Also, if you think that 6.3% is an average profit margin why did you set the average profit margin in your example to less than 1/2 that value if not to boost your agenda (realistic, right?). Your example also makes no adjusment for those levels paying little or no taxes but uses the same rate for all (realistic, right???). And adding other levels (with most showing generally profitable operation instead of using continually marginal businesses) will show the cascading and embedding picks right back up.
You seem to think that using random generation does not mean that one cannot generate many sets of numbers and taake the one that best suits the agenda he has. It certainly can as you've shown. Spreadsheets are just like the old saying "figures don't lie but liars figure". Since there can be an infinite number of spreadsheet examples I certainly don't intend to debate each and every one with you. I've said that yours is no more "realistic" than any other and does not show the mechanism that I was illustrating nearly as clearly as does my example.
The costs in my examples are there and adjusted for by the arrangement rather than broken out as separate items to allow profit reductions as you do. Your Cost of Value random generation is what accounts for the break-even level and the level "making the most profit" being similar and nothing else.
As for your pretense that you have "a better understanding of business in the real world", that's truly funny since as I have always said the cascading embedded tax examples are NOT intended to be illustrative of any company or set of companies but to illustrate the mechanism of cascading embedded taxes which my examples show and which yours intentionally obscures - and is no more realistic either.
So the net of it is that your example is not realistic at all, is selected to show a specific agenda you have - which of course it does having been constructed for that purpose - and it STILL shows, as I said, that you have proved that the 15% price decrease by stopping the income tax is quite within reason.
Thanks, Nightie, I always knew you had it in you. Demonstrating something by your riduiculous spreadsheet contrivance that you have been denying all along - that there's lots of room for price decreases when the income tax goes bye-bye even without touching employee wages.
Or is your "example" haywire, operhaps???
pigdog's response is hilarious. The more he writes, the more he proves his TOTAL lack of understanding of all aspects of this discussion.
"... it's very clear who has a better understanding of business in the real world ..."
You shouldn't keep inflating your own ego by blowing through your little finger so much; might enlarge your bald spot! Your example is not real at all as I've shown in #496.
All you've done is completely destroy your own "SQL debating standard" that the FairTax will not reduce prices when you clearly show substantial room for such reduction due to removal of the income tax ... is there an echo in here??