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One of the most dramatic aspects of NRST is one that few people have yet mentioned: it is not nearly as progressive as the current tax structure. This is true, even if one counter-intuitively assumes that those in the highest income groups consume the same proportion of their income as those in lower income categories. Those who believe that the higher income categories have been paying more than their fair share of taxes believe that this shift in tax burden is long overdue. Others, like myself, believe this shift in burden is, reason alone, to reject the NRST unless it rectifies this characteristic by replacing a portion of the consumption tax with, for example, an economic transactions tax. An economics transaction tax on financial transactions, even if taxed at just ½ of 1%, could probably allow a substantial reduction of the NRST.

I was unable to post the table reflecting my calculations but would be glad to do so if someone explains how or I will email the tables on request. The table shows that the lowest quintile group is ever so slightly worse off under NRST relative to the current tax structure. The top quintile benefit substantially. The table shows that people making under about $70K will pay more and people over $70K will pay less. The worst impact seems to hit the $35K income level.

My calculations assume no change in retail prices. Supporters of NRST point to studies by credentialed economists that estimate the NRST will unleash price reductions of 20% to 30%. With price declines of this size, all groups are better off than under the current scenario. In other words, when price decreases are included in the analysis, a “free lunch” scenario is created: even those income groups that pay a greater share of the ultimate tax burden under NRST will benefit relative to their present situation if prices decline sufficiently. For example, even the hardest hit 3rd quintile will fare better than the current structure if prices decline 16%. Of course, if such price increases do occur, all other groups do substantially better under NRST, particularly the highest income groups.

While I have not yet studied Jorgenson’s work, I will say the projection of 20%-30% price decreases do not sound very plausible on its face.

Of course, if such price increases do occur, all other groups do substantially better under NRST, particularly the highest income groups.

That should read "price decreases"

This is true, even if one counter-intuitively assumes that those in the highest income groups consume the same proportion of their income as those in lower income categories.

This should read:

This becomes even more dramatic if one assumes that those in the highest income groups save a significantly higher proportion of their income as those in lower income. categories.

Absent from your analysis the the fundamental change in the tax environment.

Specifically, the nrst when passed will put heavy downward pressure on taxes and hence spending.

IMO, that is fundamental to the argument.

While I have not yet studied Jorgenson’s work,

Obviously

I will say the projection of 20%-30% price decreases do not sound very plausible on its face.

And Democrats say Republicans throw grandmothers in wheelchairs off cliffs to watch the splatttt.

Jorgensen is not the only source for determining a decrease in product shelf prices as a consequence of repealing business and payroll taxes.

See: Associated General Contractor's Testimony before Congress AGCA '00

I have also refered you to Mastromarko 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."

Supported by Mastromarco's accompanying chart of emperical study of replaced taxes on price, where the range of values from industry to industry appears to be about 12-25%.

And the report by 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 all federal taxes in price.

The Robbin's attributed over 33.6% of "consumer prices" to be due to federal taxation passed on to the customer.

Refer 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.

Total revenues collected by Feds in '00 = $1945billion ( 33.6% of consumer price)

Those tax components which will not change prices as a consequence of enactment of HR2525

Individual Income Tax(Labor) = 945billions,
Employer half of Social Insurance = 653/2 = 326.5billions,
Excises = $68billion
Customs Duties = $19Billion
Miscellaneous = $40Billion

============================

Total constant price factors = $1358.5 billion
Remainder federal tax components affecting price = (1945-1358.5) = $586.5

Adjust for a conservative $600billion(1995 figure, AGCA '00, Payne '95, PillaBartlettNorquist '95 ) interest & cost of compliance effects.

Total tax related factors affecting consumption price = (600 + 586.5) = $1186.5billions

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 Jorgensen empirical study of 22% fall in producer prices.

The 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.

I have strongly supported the rationale for consumer shelf prices to fall in response to repeal of business remitted taxes

Now I would suggest you support your expectation that consumer price cannot fall when the component costs represented by taxes compliance costs remitted by business go away.

Your "I will say" fails to meet the mark. Jorgensen, the Robbin's and other economists working with AGCA have to stand up to peer review of their publications demonstrating the results they report with their professional credentials and reputations on the line.

My own thumbnail calculations confirm the correspondence between Robbin's & Jorgensen, along with the AGCA remarks on the topic.

I would contend your unsupported statements do not stand well against either common sense or the studies of people who reputations depend on being correct in their data and methodology from which their conclusions derive.

Tell us then where do the repealed business taxes go, if not into product price reductions and product quality under the extemely competitive pricing environment of consumer goods in todays markets.