Posted on 05/12/2005 7:46:54 PM PDT by Your Nightmare
Members of the President's Advisory Panel on Federal Tax Reform on May 11 expressed concerns over the FairTax national retail sales tax, a plan that has emerged as an alternative with a major grass-roots push.
Panel chair Connie Mack, vice chair John B. Breaux, and other members worried the plan would be difficult to enforce, would be regressive, and would require a high rate in order to take in enough money to fund the government.
Breaux raised concerns that the proposed 23 percent (tax-inclusive) rate would not be sufficient to raise the revenue necessary to fund the government. The Joint Committee on Taxation estimated that it would take as much as a 57 percent (tax-exclusive) rate to be revenue-neutral. Further, Breaux said he thought exemptions that would be carved out to make the sales tax progressive would also complicate it.
Mack, who raised concerns similar to his fellow panelists', said he was "intrigued" by the plan. "But if it's such a great idea, why haven't other political entities around the world pursued it?" he asked.
Americans for Fair Taxation Executive Director Tom Wright emphasized that the plan emerged after "thorough academic research" and "thorough polling" The strong grass-roots push has resulted in some of the group's 600,000 members appearing at each of the panel's hearings and has inspired a large comment-writing campaign to the panel in support of the plan.
Sales tax advocates were among the 20 witnesses who gathered before the panel for a full day of testimony on tax reform proposals. Although the group has held several other hearings in Washington and around the country, the May 11 meeting was its first hearing on specific reform plans since Bush appointed the panel in January. The panel has been charged with identifying tax reform proposals that are progressive, encourage charitable giving and home purchases, and are revenue-neutral. The proposals are due by July 31.
Among the tax replacement and reform plans presented to the panel were the value added tax, consumption-based tax, and the flat tax, as well as proposals that would use the current income tax as the foundation.
Witnesses generally claimed that theirs was the fairest, simplest, most flexible, most transparent revenue-neutral proposal that would improve economic growth and savings while meeting the president's criteria of encouraging charitable giving and home buying. Witnesses presenting consumption-based plans praised their overhaul as taking millions of low-income taxpayers off the rolls, being easy to transition to on a worldwide basis, and including safeguards to prevent new loopholes that would result in increased complexity down the road.
Tax reform panel members, who agree the current tax system needs to be fixed, grilled witnesses without revealing whether they will ultimately endorse a consumption- or income-based tax or a different mixture of the two.
Get back to me when you look up the phrase "time value of money".I'm familiar with "time value of money" and maybe you should look it up because I don't think it has a thing to do with the profits of company and income taxes.
Of course it does. Running a company is an investment. If the after-tax return on that investment doesn't justify the risk behind it, then it's a bad investment, and the resources should be directed elsewhere.
In other words, why should I bust my butt for 70+ hours a week to get the same after-tax return I could get from, say, a nice low-risk mutual fund? Even a business that doesn't lose money is a failure if the return it generates doesn't justify its risk. Of course, there are degrees of failure... obviously a company that loses money outright is more of a failure than one that diminishes the investment through simple inflation-driven dilution. But that's a matter of degree, not order.
I make more money, pay more income taxes....must be time to RAISE my prices. Go figure.
Of course it does. Running a company is an investment. If the after-tax return on that investment doesn't justify the risk behind it, then it's a bad investment, and the resources should be directed elsewhere.I believe what you are talking about is "opportunity costs." "Time value of money" is something completely different.
Using babblefish to translate again? Only someone ignorant of economics would call something "Kenesian" rather than the proper name "Keynesian" big shock. My economics is not "Keynesian" either having been educated by University of Chicago economists. Those "igonrant" of Economics are blissfully unaware that this is the MOST conservative market oriented school of economic thought anywhere in the world. And they will be unaware that most of the Nobel Prizes in Economics have gone to professors connected to that school.
If you refuse to study the subject seriously then ignorance is NOT correctable.
But there are NO income taxes to pay.
Seriously though if pricing is not done right then the business generally has no profits and does fold. YOur question merely points out what I have been saying -a business should try to operate at the point of maximum profit which will mean maximum income taxes and maximum after tax income.
Price theory has developed to explain why businesses succeed or fail due to pricing successes and failures. You seem to believe that a business can select any price it wants and still be successful. The income tax is NOT a cost of business but a tax on what is LEFT after the business operates. It does not affect the allocation of resources within the business as do ALL real costs.
No, and don't try to twist my words. The business must either be able charge a high enough price to be profitable after taxes, or fail. It cannot just "select any price it wants" unless it is an unregulated monopoly or de-facto monopoly. But neither can it fail to include all factors to net profitability, which includes costs, prices, and adjustments to gross income, such as taxes.
Time Value of Money is a component of the Interest Rate. Essentially it is the cost of delaying consumption between now and a future period. In other words how much will it cost for me to lend you $1000 until period 2.
It has nothing to do with income taxes and he is trying to talk about "Opportunity costs" in his example.
Income taxes are not an adjustment to GROSS income but to NET income (profit) this is a point I have been fruitlessly trying to make understood. Surely you see that the decision to stay in a business is decided by its profitability which is NOT affected by income taxes. EVERY business' income is taxed the same way given its form of incorporation or non-incorporation.
Profitability is the determinant of investment and that profitability will be affected by income taxes the same way for all businesses thus it is NOT affected by IT. Your decision to get out will be because the rate of profit (before IT) is not high enough NOT because the income tax exists.
Profitability is the determinant of investment and that profitability will be affected by income taxes the same way for all businesses thus it is NOT affected by IT. Your decision to get out will be because the rate of profit (before IT) is not high enough NOT because the income tax exists.Besides, whatever you might do with your resources that you think will bring you greater return would be taxed the same way, too. If the other opportunity has a greater return, it will be greater regardless of the income tax.
What is so difficult to comprehend about that?
What is so difficult to comprehend about that?We don't believe that the income tax and the IRS are the root of all evil. These guys are fixated on getting rid of the IRS and it has skewed their perspective.
"Our income tax system has no effect upon pricing and thus is not disadvantegous wrt the rest of the world."
"Can you believe this?"
Amazing, isn't it? He has no clue and he acts like he is the source of all knowledge and wisdom as it pertains to economics. There isn't an economist in the world who would subscribe to this lunacy. Where do the funds to pay taxes (ALL taxes) come from .... manna from heaven, I guess.
I give up. It's like talking to a brick wall. The "SQLs", as PD calls them, will twist any economic or business principle around to deny any benefit of the FairTax. This may be as lame as YN's contention that, since the timing differences of income taxes appear on the balance sheet, that proves that income taxes are not a "cost".
As the old saying goes "a little knowledge is a dangerous thing." That being the case, the SQLs must be VERY dangerous.
"Ridiculous. Even if you don't explicitly factor those taxes in, you have to charge enough so that your after-tax profits are enough to justify the investment of time and money into your business. Just because you're not doing it consciously doesn't mean you're not doing it."
Thank you, KK, for that lucid comment. It bears repeating. I wonder how many of thes economic geniuses who say that income taxes are not a cost have ever tried to raise capital for a business. They should try to convince a prospective investor that it is only pre-tax income that determines their ROA and that income taxes do not count.
Based on what I have seen you display here that would be very hard for me to believe but if that is in fact what you learned there I thank God for having delivered me from it!
Investors who lend you money are not concerned about income taxes since they are paid interest which is a tax deductible COST. They only want to be sure that you make a profit so that you CAN pay income taxes and that there is enough revenue to pay the interest and principle.
Investors who buy stock are generally investing for the Capital Gain in the Stock and again are not concerned about income taxes since often the CGs come before any profits are made. Generally the stocks having the largest capital gains do not pay dividends either.
Once more your cluelessness is apparent since the potential investor has to face the same income tax for ANY investment thus it cannot be a factor in his decision. ONLY potential profitability is. This is beginner stuff and you snidely call us "geniuses".
Any objective observer with knowledge of economics would say that you are getting your ass kicked and making a fool of yourself. When even basic concepts are foreign how can you do otherwise?
Tell us the truth have you ever taken an economics course in college? Successfully that is.
Amazing, isn't it? He has no clue and he acts like he is the source of all knowledge and wisdom as it pertains to economics. There isn't an economist in the world who would subscribe to this lunacy.You are really showing your ignorance. Justshutupandtakeit hasn't stated anything that isn't well accepted in the economics field. You really need to get up to speed on these issues if you want to appear as if your support of the FairTax is based on reasoned judgment. The ignorance of FairTax supporters of basic economic theory is, frankly, shocking.
Compared to these KnowNothings I am practically Milton F'n Friedman and Adam Smith rolled into one.
I suspect none of these folks have EVER taken even ONE Econ course. Successfully.
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