Posted on 05/27/2006 5:12:45 AM PDT by RobFromGa
Lies, damn lies and statistics bump.
Rob
I went back and read your "Fair Tax Primer" from the link on this post. I don't argue with the numbers you used to judge the amount business could lower the price of their product. I have a problem with the numbers you didnt use, the ones that show the reduction in cost of their incoming raw materials, the reduction their suppliers realized. Obviously this will vary from business sector to business sector but your analysis is oversimplistic.
Excellant points and exactly why I want the Fair Tax. No taxing system is perfect, but this one now is bizzare. Moreover any tax that takes a % of income will be tweaked with exclusions just like this one.
Good clarification.
I think it is safe to say we can keep God out of this tax issue.
God never gave Moses or Jesus a formula for taxing...matter of fact he said" Render unto Cesaer what is Ceaser's".
I am really tired of people putting God in places that they have a stake in personally....ie, What would Jesus drive? and..God's tax plan.
Make taxes visible and felt by all...take the power away from government.
Right, this is part of what I like about the flat tax. I like the idea of Americans looking at the flat tax rate being raised and being collectively outraged. One of my worries about the Fair tax is that, by leaving it for businesses to deal with, it makes it easier for citizens to ignore and think of as a tax on "them" rather than "us".
But my main feeling about this is based on the fact that, as I see it, the flat tax would at the very worst be a step toward the fair tax; I think the best chance of getting rid of the income tax would be flattening the income tax first. With China booming, the U.S. needs to stop its road to serfdom as quick as possible or risk being left in the dust.
Only Fair taxers have that privilege.
check this thread out. Afterwards, re-read rob's tagline. LOL.
The largest area of tax savings in the FairTax will be the elimination of the employer half of the SS/M payment. This is 7.65% which can be saved on the total payroll of the company. If we assume that a company's costs are all labor, with a 10% profit margin (after paying all costs of doing business), and no one makes more than $94k wages, then the potential for savings is 6.9% if the company keeps all of the "employer half". (90% of 7.65%). Then there is compliance savings which for most businesses will be below 1%. And corporate taxes are only paid by C corps. So, for most businesses the corporate tax rate is zero. So, this example gives a max 8% savings, and with a entity that pays corporate taxes it might be as much as 10% cost savings to pass along.
In the case of a business that was not all labor, say 40% payroll costs, and 50% incoming raw materials (let's say all domestic supplied, no foreign content), and the same 10% profit margins.
In this case the savings on payroll would be 40% of 7.65% which is 3% savings, plus the previously calculated max 10% savings on the incoming raw materials, which is 50% x 10% = 5% more savings, plus the 1% compliance savings and we are at 9% plus corporate taxes (in the case of C corps).
If they have more incoming raw material costs, they have lower payroll costs, and vice versa. Both areas will have about the same amount of savings, about 8%, so the percentage of raw materials to labor doesn't matter too much for a rough calculation, which these admittedly are.
I am only trying to show that the 22-23% savings numbers bandied about by the FairTax folk are a farce, and that the real potential savings are in the 8-10% range.
The basic idea is that if I am making a pizza and I save 10% on my pepperoni, and 10% on my cheese, and 10% on my flour, and 10% on my labor, and 10% on my rent-- I have not saved 50% of my costs. I have reduced my costs by AT MOST 10% in this example.
Now if these raw materials are foreign, like oil and many commodities, then there is no cost savings on that part of your cost structure.
Yes, that's the point. Nobody uses inclusive rate to determine after tax price. It's much easier to use exclusive - as I've always said.
It is ignorant to compare today's income and payroll tax rates (inclusive) to any exclusive rate. That would be like comparing my weight in kg to your weight in pounds - nonsensical and absurd.
see #76
The percentage calculations were wrong. That's what people are saying. It isn't that anyone is having trouble "getting over" them - they were wrong.
We are all just intelligent enough to see that your position is built on lies and mis-representations.
Are you now guilty of doing what you accuse tax reform advocates of?! ... mis-representing and denying the error?!
I do to. He refuses to acknowlegde the existence of those savings by simply saying "there won't be any".
I issued a correction for those who could not understand the tongue-in-cheek nature of the percentage calculations. There is no denial involved.
see #90 for an explanation, pay special attention to the pizza analogy.
Right, this is part of what I like about the flat tax. I like the idea of Americans looking at the flat tax rate being raised and being collectively outraged.
But the flat income tax retains business taxes, including payroll taxes. The money to pay those costs are either in hidden higher prices or hidden in lower wages. That's why your position doesn't make sense to me. If you prefer to eliminate hidden taxes then why would you opt for the reform option that includes the most hidden taxes?
Not quite, unless you want to consider Thomas Jefferson a traitor.
The exercise of a free trade with all parts of the world [is] possessed by [a people] as of natural right, and [only through a] law of their own [can it be] taken away or abridged.
--Thomas Jefferson: Rights of British America, 1774.
Jefferson believed tariffs should only be applied in retaliation and never as as a general policy. A greater president yet, Ronald Reagan, believed that tariffs only hurt the country that applied them. Neither were "traitors".
Alexander Hamilton only favored tariffs for what he called “infant industries”. As he wrote in his "Report on Manufactures" (1791):
The superiority antecedently enjoyed by nations who have preoccupied and perfected a branch of industry, constitutes a more formidable obstacle . . . to the introduction of the same branch into a country in which it did not before exist. To maintain, between the recent establishments of one country, and the long-matured establishments of another country, a competition upon equal terms, both as to quality and price, is, in most cases, impracticable. The disparity . . . must necessarily be so considerable, as to forbid a successful rival ship, without the extraordinary aid and protection of government.
The United States has existed WAY too long for the “infant” excuse to hold. As President Reagan said, the thing about infant industries is that they never seem to grow up.
National tariffs would make for poor incentives. The Flat Tax is a much better idea.
I can see your point, byt there's nothing about the flat tax that demands in principle that those inane taxes be kept just as there's nothing about a national sales tax that demands in principle the income tax be eliminated. Take this flat tax proposal, for instance -- it calls for the elimination of the payroll tax.
Everything you say is correct - and the 10% savings will be allocated to lower prices, higher wages, or improved ROI according to competitiveness.
This pizza example is only one level of production. It's the savings from previous steps you ignore. Do you deny the existence of savings in previous steps of production?
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