Other costs don't affect the savings %. Have you ever tried to construct a sheet?
Once again, only two things make up the bulk of taxes paid in this country-- taxes on labor and taxes on corporate profits. These taxes make up the vast majority of the tax revenue in the US.
In 2004, taxes on labor were $1.588 billion, and Corporate taxes were $212 biilion. (there was also $25 billion estate taxes which are negligible for the purposes of this post). The total federal revenue was $1.825 billion. Of the labor taxes, $839 billion were personal income taxes, $374 billion was employee half SS/M, and $374 billion was employer half of SS/M.
So, the money that the FairTax is going to remove from the costs of goods and services is $212 billion corporate taxes, plus $374 billion employer half SS/M for a total of $586 billion. $839 billion income taxes plus $374 billion employee paid half of SS/M is now targetted to go back to the employees in the "keep 100% of your paycheck promise". So, $1.21 billion is being given to the employees as a windfall pay increase, and is not available to reduce costs.
This $586 billion is only 32% of the original taxes that were intended to be wrung out of the producer cost structure.
The FairTax people tell us that 22-23% of the cost of the average goods and services is embedded costs of the present tax system. So, now we are only getting 32% of that embedded cost out, which is 7-8% of the original 22-23%. Adding another $200 billion in compliance savings and we arrive again at the 8-10% savings number I have previosuly estimated for what can be removed from the cost of goods under the FairTax.
Assuming an 8-10% reduction in shelf prices, the addition of the 30% Fairtax means prices paid go up 17-20%, also as I have been saying.
Once again, only two things make up the bulk of taxes paid in this country-- taxes on labor and taxes on corporate profits. These taxes make up the vast majority of the tax revenue in the US.
In 2004, taxes on labor were $1.588 trillion, and Corporate taxes were $212 billion. (there was also $25 billion estate taxes which are negligible for the purposes of this post). The total federal revenue was $1.825 trillion. Of the labor taxes, $839 billion were personal income taxes, $374 billion was employee half SS/M, and $374 billion was employer half of SS/M.
So, the money that the FairTax is going to remove from the costs of goods and services is $212 billion corporate taxes, plus $374 billion employer half SS/M for a total of $586 billion. The $839 billion income taxes plus the $374 billion employee paid half of SS/M is now targetted to go back to the employees in the "keep 100% of your paycheck promise".
So, of the $1.825 trillion in taxes presently embedded in the prices of goods and services, $1.21 trillion is being given to the employees as a windfall pay increase, and is therefore not available to reduce producer costs, and therefore cannot be used to reduce the shelf prices of goods and services.
The $586 billion that is being removed from the cost of goods and services is only 32% of the original taxes that were intended to be wrung out of the producer cost structure in the FairTax plan as it was modeled by Jorgenson, et al.
The FairTax people tell us repeatedly that 22-23% of the cost of the average goods and services is embedded costs of the present tax system. This includes all of the income and payroll taxes now paid by wage earners and business owners, as well as the corporate profit taxes where applicable. So, since now we are only taking 32% of that embedded cost out, this calculates out to a removal of 7-8% of the original 22-23% estimate. Adding another $200 billion in compliance savings and we arrive again at the 8-10% savings number I have previosuly estimated for what can be removed from the cost of goods under the FairTax.
Assuming an 8-10% reduction in shelf prices, the addition of the 30% Fairtax means prices paid go will go up 17-20%, also as I have been saying.