Does that really make sense to you ?
If the salary is $100K, then the business is paying the employee $80K, withholding $20K, and sending the IRS an additional $7K in SS/M taxes. Then the business also sends the IRS the taxes on its profits. And the business spends money on tax compliance, loses money by making decisions based on taxes instead of good business, etc. All its raw materials or payments to vendors also had these costs built into them. The Money Magazine author could not possibly have asked the question the way he did and gotten that answer from Jorgenson. He is lying, or wants us to think Jorgenson is an idiot that can't do simple math.
This is where the price reduction comes from, not from lower wages to employees. Don't take anybody else's word for the whole "reduced wages" argument. Go to yahoo or some other financials page. Look at the financial statements for major companies. See what they paid in profit taxes as a percentage of their revenue. Look at their company profile and look at how many employees they have and their average wages. Calculate the employer-side SS/M taxes. Take that total percentage savings and apply it to all the company's overhead costs and raw materials costs. It's all right there for you on the financial pages. If you do this for Bank of America or IBM you'll see where over 15% of revenue could obviously be saved if there were no business taxes. Without reducing wages or profits by a penny. And there is extra to be saved on compliance costs -- generally another 2% of revenue.
Right, then simply have AFFT call Dr. Jorgenson to clear this up. AFFT paid Dr. Jorgenson lots of money to be one of their lead researchers, surely Dr. Jorgenson would be willing to answer a couple of questions for AFFT to clear all this up????? Wrong, AFFT does not want to clear this up because they have been caught in a lie they have been telling for over 7 years. AFFT knows this is a major misrepresentation. There is not enough embedded taxes that businesses pay to come anywhere near 23% as has been demonstrated on this forum hundreds of times.
Let's see, Money Magazine says it, Dr. Jorgenson says it, and Neal Boortz says it.....the only people still lying about embedded taxes are the AFFT.
Just how fair is the 'FairTax'?
Money Magazine
Part of the problem is the way Boortz and Linder are using the idea of embedded taxes. In an eight-year-old study paid for by AFFT, Harvard economist Dale Jorgenson noted that because the taxes paid by everyone in the chain of production are embedded in the cost of goods, prices could decline an average of 20 percent if all those taxes were scrapped. The FairTax Book devotes an entire chapter to this idea.
What The FairTax Book fails to mention is that prices can only fall this sharply if companies cut wages. I asked Jorgenson about this, and he agreed.
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JORGENSON EXPLODES FAIRTAX MYTH (FR Exclusive)
August 25, 2005 | RobFromGa
Dr. Jorgenson,
Excuse me for my lack of understanding of your answer, when you say "workers would keep that after-tax pay" are you saying that if they are making $1000 a week now, and paying $200 payroll+income taxes now, that under the FairTax you were assuming that workers would get paid $800 and keep all of that? Or are you saying that you meant they would make $1000 under the FairTax?
Regards,
Rob (freeper RobfromGa)
Dr Jorgenson responded:
August 24, 2005
Dear Rob,
I am saying that the worker would continue to receive the after-tax amount of $800. Prices received by producers would decline to cover the cost of after-tax wages to workers and after-tax dividends and interest to investors. However, taxes paid at the retail level would include the Fair Tax.
Best,
Dale
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Fair Tax - Straightening Out Some Confusion
Nealz Nuze ^ | 9/15/2005 | Neal Boortz
Now here's what we didn't explain well in the book.
Every employee of any company involved in American commerce is also a provider of a service, and, as such, the employee incurs a tax liability as a result of his or her work. This tax liability is incorporated into what the employee charges the employer for their services, and is eventually incorporated into the final retail cost of the employer's product or service. Each employee is essentially a separate business entity providing a product, be it physical or mental labor, to the employer.
The extensive research behind HR 25, The FairTax Bill, shows that the average embedded taxes in every consumer product or service is about 22%. In some industries, such as leather goods, the embedded tax is smaller. In other industries, such as homebuilding and construction, the embedded tax is higher, but it averages out to somewhere between 22 and 23%. With the passage of The FairTax Bill, those embedded taxes disappear. These embedded taxes include the combined tax burdens of all entities involved in bringing those goods or services to market, and that includes you, the employee, and the taxes you incur as a result of your employment.
We write in The FairTax Book that the competitive pressures of the marketplace will force prices down when embedded taxes disappear from the cost of retail goods and services, and we cite 22% as the average amount of those embedded taxes. Does this 22% include the income and payroll taxes that are paid by employees? Yes, it does.
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There is no wiggle room. The 22% embedded tax number AFFT quotes so often from Dr. Jorgenson includes taxes paid by the employee. There is no keeping 100% of your current gross wages AND prices falling 22%. It is a lie that AFFT keeps on telling. And it is a lie because they damn well know better.