Statement of John G. Wilkins, Managing Director,
Barcroft Consulting Group, on behalf of National Retail FederationTestimony Before the House Committee on Ways and Means
Hearing on Fundamental Tax Reform
April 11, 2000
....Examined on a year-over-year basis, these price increases generally amount to a large, one-time hike in prices as the NRST is imposed, with some moderation of this increase in the longer run. Due to a weaker dollar, merchandise import prices increase by nearly 4 percent shortly after the NRST is imposed and are 6.5 percent over baseline levels in 2010. Merchandise export prices are also above baseline levels. In 2001 and 2002 they are nearly 3 percent above the baseline. However, due to lower interest rates, which reduce business costs, (They can't get much lower than they are today) export prices are only slightly greater than baseline levels for most of the remainder of the forecast period. The overall impact on prices is measured by the change in the GDP deflator, which initially rises 20 percent above the baseline price level before settling back to a 13 percent price rise relative to the baseline.....
The notion espoused by some that pre-tax prices would drop some 20-30 percent under a NRST (so that after-tax prices would not rise and may even decline) is a peculiar one. This could only happen if all of the personal income tax, the corporation income tax and payroll taxes are currently embodied in retail prices. Tax incidence -- that is, who actually bears the ultimate tax burden -- is an elusive question that has been the focus of many economic papers, because the answer is not clear. However, the general consensus among economists is that perhaps a portion of the corporate income tax may be passed on to consumers in the form of higher prices, but that the majority is ultimately paid by corporate owners in the form of lower after-tax profits and by employees in the form of lower compensation. Most economists concede that personal income taxes and payroll taxes are ultimately borne by labor and are not passed on to consumers in the form of higher prices.
That's supposed to be bad? A 13% increase in costs in exchange for elimination of income and payroll taxes is a great deal.
perhaps a portion of the corporate income tax may be passed on to consumers in the form of higher prices, but that the majority is ultimately paid by corporate owners in the form of lower after-tax profits and by employees in the form of lower compensation.
If this is true, then a NRST will also result in higher wages and more profits to shareholders.
Thanks for trotting out Mr. Wilkins (on Behalf of the National Retail Federation) I will add large retailers to the list of those who do not care for the NRST.
Interesting that Mr. Wilkins states..but that the majority( corporate taxes) is ultimately paid by corporate owners in the form of lower after-tax profits and by employees in the form of lower compensation.
This clearly to me illustrates that eliminating corporate taxes will allow for more profits or lower prices, amazing isn't it, just worded differently. As for lower compensation to employees because of the corporate taxes, that shows that eliminating corporate taxes would allow employees to be paid more (or reduce prices). Once again just a play on words.