1) Prices ALREADY include a tax component of an amount ggreater than 23%. Any income tax system passes tax costs along to the next step in production - just as any other cost is passed along. Tax costs include the taxes themselves and associated compliance costs. Tax costs alone come to 22% of prices (geezer can give a link). Of course some tax and compliance costs manifest in lower wages, but there is still at least a 23% increase in price due to the costs of the income tax.
2) If all the costs of the income tax were eliminated... that means eliminating income tax and eliminating associated compliance costs, profit margins could soar.
3) We live in a competitive market environment. In any competitive market, prices will fall to the lowest level possible to still have the business make the required return. If a company chose NOT to lower prices, it would lose market share fast- 23% is a big savings.
4)When tax costs are eliminated from prices, prices will become lower by the amount of the tax costs (very nearly).
5) Then add the 23% nrst and prices come right back up to where they were.
So, prices won't change because prices are first affected by a decrease (eliminated taxes and compliance costs) before the nrst is added.
But now folks have their paychecks free of federal deductions.
Hope this is expressive. I'm awfully tired... long drive today w/ sick child.... arghhh.
How I wish for no payroll tax.
Tax costs alone come to 22% of prices (geezer can give a link).
Refer to the section of the following article about the Income/Payroll tax system and its impact on our economy "A. Hidden Upstream Taxes. " paragraph 39.
"[39] Dr. Dale Jorgenson, Chairman of Harvard University's Economics Department, believes that the price of goods and services are inflated by about 20 percent or more by upstream taxes consumers ultimately bear. In a recent paper Dr. Jorgenson estimated the built-in taxes contained in the price of goods and services. /22/ In the chart above, he quantified the hidden component of tax, estimating that producer prices would fall on repeal of upstream taxes an average of about 22 percent."
Looking at the accompanying chart, the range of values from industry to industry appears to be about 12-25%.
Economists Gary and Aldonna Robbins of the Texas-based Institute for Public Policy examined the case of dry cleaning a shirt, with a particular eye toward uncovering the hidden costs of taxes in price.
The Robbin's attributed over 33.6% of "consumer prices" to be due to federal taxation passed on to the customer.
The Federal Tax System
http://www.cbo.gov/showdoc.cfm?index=2125&sequence=0&from=1#pt1
From the Table 1 we may extract the proportionate contributions of each sector of taxes as they contribute to consumer price for the year 2000.
Those tax components which will not change prices as a consequence of enactment of HR2525
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Adjust for a conservative $600billion(1995 figure, AGCA '00, Payne '95, PillaBartlettNorquist '95 ) interest & cost of compliance effects.
Estimated change in consumption prices as consequence of enactment of a National Retail Sales Tax, repealing all business income and payroll taxes:
33.6*(1186.5/1945) = 20.5% in consumption prices
Which compares well with the Jorgenson empirical study of 22% fall in producer prices.
The two sources are in reasonable agreement, and I see 20-23% a reasonable value to expect prices to fall not only for customers here in the United States, but in our exports as well making them far more competitive on international markets.