Posted on 11/15/2004 7:00:17 AM PST by Rakkasan1
MINNEAPOLIS - Rep. Gil Gutknecht is pushing legislation that would replace the federal income tax with a national sales tax.
"Think of a world where there is no income tax, where you get to keep everything you earn and you pay the tax man when you buy stuff," Gutknecht, R-Minn., told the Star Tribune of Minneapolis.
(Excerpt) Read more at twincities.com ...
He also forgets about all the layers of production leading to retail. Of course, he doesn't really forget. He just has to invent something as an issue because he won't tell us the real reason he opposes the nrst.
Consumers are the engine of the economy.
Wrong. Producers are the engine of the economy. For there to be consumption their must first be production. Without producers and production consumption is impossible.
Consumers/consumption is friction/wear to production. Once consumers have consumed all of a company's goods and services that friction/wear causes the company to either fold or increase production.
How you managed to get it so backwards in your mind is..... well, par for the course.
Again, you see an outrageous number and don't even question it
How is less than doubling the U.S.'s low rates of savings & investment in the first year of a change to taxfree investing something outrageous?
Even a full doubling of current savings and investment rates would still only be a single digit percentage of income my friend.
The lack of incentive to invest, is why most folks are so horridly dependant on a failing Social Security system. That change is grossly overdue.
First you ask for a source, then when it's provided, you ask for a "verification source". It's never ending. You will never be placated because you still haven't told the real reason you oppose the nrst.Talk about straw men. I've only asked for a paper that verifies Jorgenson's claim. We've all been aware of Jorgenson's paper for a long time. Why would I ask for it? I have several versions on my hard drive and in print.
http://www.economics.harvard.edu/faculty/jorgenson/papers/baker.pdf
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Revised April 12, 1999.
This paper was prepared for presentation at the PDF page 24-25: 3. Figure 5 compares the impacts of the Flat Tax and the Sales Tax on GDP. Under the Flat Tax the GDP is only 0.6 percent higher than the Base Case in 1996; the impact of this tax reform on GDP gradually rises, reaching 1.3 percent in 2020. Under the Sales Tax the GDP jumps by 13.2 percent in 1996, but the impact gradually diminishes over time, falling to 9.0 percent in the year 2020. The short-run differences between these two tax reforms are due mainly to the impacts on labor supply, while the long run differences also reflect the impacts on capital accumulation. 4. Figure 6 compares the impacts of the two tax reform proposals on consumption. The impact of the Flat Tax in 1996 is to increase consumption by 3.5 percent, relative to the Base Case. This impact gradually diminishes over time, falling to 1.3 percent by 2020. While it may seem paradoxical that consumption increases with a rise in the consumption tax, the marginal tax rate for low-income taxpayers is reduced to zero, stimulating consumption. By contrast the Sales Tax curtails consumption sharply in 1996, resulting in a decline of 5.6 percent, relative to the Base Case. However, the level of consumption overtakes the Base Case level in 1998 and rises to 5.5 percent above the Base Case in 2020. 5. Figure 7 compares the impact of the two tax reform proposals on investment. The impact of the Flat Tax in 1996 is to depress investment by 8.6 percent, relative to the Base Case. Investment recovers over time, eventually reaching a level that is only 1.7 percent below the Base Case in the year 2020. Substitution of the Sales Tax for existing income taxes generates a dramatic investment boom. The impact in 1996 is a whopping 78.5 percent increase in the level of investment that gradually gives way by the year 2000 to a substantial increase of 16.5 percent, relative to the Base Case. |
The award for bureaucratic understatement goes to the Treasury Inspector General for Tax Administration office. They title a report, "Improvements Are Needed to Ensure Tax Returns Are Prepared Correctly at Internal Revenue Service Volunteer Income Tax Assistance Sites." Here is a excerpt from their conclusion:
"In an attempt to have tax returns prepared, from February through April 2004 Treasury Inspector General for Tax Administration auditors anonymously visited 44 VITA sites nationwide acting as taxpayers and presenting facts based on scenarios designed around income reporting, filing status, exemptions, and the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). Of the 35 tax returns prepared, none were prepared correctly."
http://www.treas.gov/tigta/auditreports/2004reports/200440154fr.pdf
Indeed.
You used to ask for sources one of which Jorgenson became. Then you ask for sources to the sources.
Why not just tell the real reason you oppose?
While GDP rises 13.2% first year and Investment rises 78% over income tax investment rates then returning to more normal levels 16% above the income tax Base Case.Read Jane Gravelle's "Behavioral Responses to a Consumption Tax" in United States Tax Reform in the 21st Century. It explains why Jorgenson's results are so out of whack. Of course, you don't think a 30% labor supply increase and a 80% increase in investment in one year is unreasonable so I'm sure you'll find something wrong with her paper.
You used to ask for sources one of which Jorgenson became. Then you ask for sources to the sources.No. I've asked for a paper that states consumer prices will drop 22%. Jorgenson's paper doesn't say this but people assume it does all the time. If you can find a published paper that states this, lets have it. I've never seen it and I've looked extensively.
Wrong. Producers are the engine of the economy. For there to be consumption their must first be production. Without producers and production consumption is impossible.Producers follow consumer's lead. A producer who makes stuff people aren't buying won't last very long.
Once consumers have consumed all of a company's goods and services that friction/wear causes the company to either fold or increase production.Companies fold because people buy all their products?
Producers follow consumer's lead.
You're still wrong. And suspect you know that. You used the word "lead" to imply that consumption comes before production.
Producers decided that consumers should have cameras, cars, telephones, electricity, electric lights, dry cleaners, computers, VCRs, etc. Then they invented them, manufactured them and brought them to market to see if people would pay for their inventions. The producers lead the consumers to buy products and services they had never imagined.
A producer who makes stuff people aren't buying won't last very long.
True. People are by nature producers, not consumers. For a consumer must produce before they can consume. Production is the engine that drives consumption and the economy.
Companies fold because people buy all their products?
Not because. To fold the company or increase production is a matter of choice. The point is that once the consumers have consumed all a company's products the consumers have nothing left to consume and must rely on the engine to produce more products.
Read Jane Gravelle's "Behavioral Responses to a Consumption Tax"
The reality is that with the implementation of a retail sales tax on goods and services coupled with the repeal of the current taxes on business, product prices receive do decline substantially under pressure of competition not only from peer businesses but competition for dollars diverted by families to savings and investement. That is what gives rise to the 4.3% decline in consumption in the first year of an NRST resulting falling prices received by business without loss of profitability and is totally consistent with Gravelle's paper.
I have no gripes whatever with her work on the subject and neither do Jorgenson or Wilcoxen.
The issues that are raised in United States Tax Reform in the 21st Century by Zodrow & Mieszkowski in regards to the VATs supposed superiority as opposed to an RST, have to do with governments ability to enforce a tax upon the citizenry.
[b]As as I stated before and I'll state it again, I am not interested in the government's desire to extract more for the citizen.[/b] Your enforcibility issue and those who consider the VAT to be superior on that basis do not even get out of gate much less place in the horserace.
The issue and superiority of the NRST is not one that allows governent be able to plunder the citizen for more, the issue of NRST superiority is one of personal liberty and empowerment that the NRST provides to citizen not the government and of superior economic performance.
Sorry your stated primary criteria of enforcibility is a position of supporting stronger central government, and is in total opposition to my stated primary criteria of personal liberty and economic growth that I conclude the NRST's inherent superiority exists over all other forms of consumption taxation.
I have read and listened to just about every pundit who has weighed in on this subject matter since before Dick Armey tried promoting it back in the early nineties. If you can remove the subjective statements from their opinions, you will find that industry, retail operations, jobs, and red tape removal will increase our economy by at least 10%. I have seen projections on the order of 30%. It would make our goods much more attractive to ourselves and the imports would be equalized as well as so many other advantages, I can't even begin to list them. It would unleash our production the likes of which has never been seen before in the history of any country.
I recommend everyone get involved in this. Study all the tax reform plans and then 'Freep' everybody on the hill concerning same over which you prefer.
That is SO good it bears repeating!!!
Yeah, and those numbers aren't realistic (geez, use your common sense - a 13% increase in GDP with 22%deflation).
Price decline arising from increased productivity and cost savings is not deflation my friend. It is a properly operating economy.
Jorgenson's model is flawed.
No your ability misrepresentation of concepts of replacing a tax on income with a tax on retail sales is flawed. Moving the point of tax collection does nothing but make a tax visible and remove inefficiency from a production process. Of course product price falls, the sum of price and tax remain essentially constant with natural decreases arising from increased productivity and production efficiency.
Your mistatement of the economics of the situation is what is flawed.
The issue and superiority of the NRST is not one that allows governent be able to plunder the citizen for more, the issue of NRST superiority is one of personal liberty and empowerment that the NRST provides to citizen not the government and of superior economic performance.So you want a tax that's easy to evade. Nice. Then the marginal rate has to be higher. Honest people have to pay more. And the economy suffers overall.
The issues that are raised in United States Tax Reform in the 21st Century by Zodrow & Mieszkowski in regards to the VATs supposed superiority as opposed to an RST, have to do with governments ability to enforce a tax upon the citizenry.There are quite a few other issues addressed in the book.
Not because. To fold the company or increase production is a matter of choice. The point is that once the consumers have consumed all a company's products the consumers have nothing left to consume and must rely on the engine to produce more products.Argh.
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