[justshutupandtakeit]

Since I (and other economists) do not believe income taxes are worked into prices I do not accept that conclusion.

[ancient_geezer]

Since I (and other economists) do not believe income taxes are worked into prices I do not accept that conclusion.

From what I can see, economists agree on an arbitrary rule is not very much support for your position.

 

Tax Incidence, Tax Burden, and Tax Shifting Who Really Pays the Tax

Inconsistent Attribution and Sloppy Theory.

Furthermore, the conventions used in tax analysis are often inconsistent from one tax to the next and fail to do a good job of demonstrating even the initial incidence of the taxes. In standard JCT burden tables, and in Treasury and CBO analytical work, consumption taxes are usually assumed to be “passed forward” to consumers in the form of higher prices.

*** Snip ***

Meanwhile, income taxes and other taxes on factors are assumed to be “passed backwards” to workers and owners of capital in the form of lower take-home pay and after-tax incomes from saving and investing.

*** Snip ***

Customs fees are an exception to this pattern. They are consumption taxes but are assumed (by the Treasury) to be borne by the suppliers of the foreign labor and capital that produced them.

Consumption taxes, such as a retail sales tax, a VAT, or excise taxes, whether imposed on consumers or on manufacturers, are routinely described as being paid by consumers in the form of higher prices because it is assumed that consumers are less flexible than producers, so that consumer prices increase by an amount equal to the tax, with none of the tax borne by the producers of the taxed goods. It is as if the supply of goods and services were totally elastic, such that production would dwindle to zero if there were any reduction in the price received by the producers, so the consumers must foot the entire bill.

*** Snip ***

The distribution of the corporate income tax is so uncertain that it is left out of most burden tables but is thought to be borne mainly by either shareholders (at least in the short run) or workers (in the long run, as capital adapts). These taxes are described as if workers, savers, and investors offered their labor and capital in totally inelastic supply, undiminished in quantity, when the tax cuts their compensation. It is assumed that they make no demand for an increase in compensation in response to the tax, so they swallow the entire burden of the income and other factor taxes that they pay.

*** Snip ***

In effect, the analysts pretend that producers can shift consumption taxes onto their customers but must absorb income taxes placed on their own earnings. Supply is infinitely elastic and infinitely inelastic at the same time. This is an inconsistent approach to tax shifting that is at odds with both economic theory and real-world experience.

In addition, neither approach deals with any further adjustments that occur in the real world when taxes are imposed and resources are shifted in response from one use to another.

 

 

Bottomline as stated by CBO in regards the corporate income tax, but easily seen from above to be applicable to any other tax paid by a business.

 

In the words of CBO's Incidence of the Corporate Income Tax,(1998):

"Most attempts to distribute the burden of corporate taxation have neglected the possible importance of effects on the relative prices of products."

"[D]etermining the incidence of the corporate income tax is an especially daunting task because the tax's relevant substitution effects are so difficult to understand. At the most fundamental level, economists disagree about what the corporate income tax actually taxes. At a higher level, they disagree about what the corporate tax does to relative prices, or incentives."

" The puzzle about corporate tax incidence in large part reflects economists' failure to integrate fully, or reach a consensus on, models of corporate behavior. Thus, the disagreement about the burden of the corporate tax stems not simply from different assumptions about the parameters of a model, but from fundamental disagreement about the model itself. As a result, authors of the current literature on corporate tax incidence still debate the theoretical assumptions and have not yet concentrated on making empirical estimates or establishing parameters."

[pigdog]

Let's be a bit more precise "... since you and SOME other economists do not believe ...".

Certainly, as we've seen from the earlier post about the dismal science, you're welcome to your own opinion. To try to make us believe that all other economists believe as you do is the worst sort of patent nonsense.

I just gave an illustration of the 75 economists who disagree enough to endorse the FairTax publicly.