Take home all your current nominal wages and don't pay anymore for goods and services with the tax.
When the burden in tax related overhead is greater than tax revenues collected as they are under the current income tax system, yes NRST plus price received by producers can indeed be equivalent to what we pay today for consumption goods and services.
Substantial lowering of producer prices well beyond the amount of tax revenue collected in business taxes per-se is reasonable expectation in any competitive market.
The expenditure of overhead costs are results in large reductions in the tax bite a business would otherwise remit to govenment, business efforts minimize the amount of revenue that is extractable from business profits. Unfortunately that avoidence comes at a high cost to the business. A cost ultimately financed by individuals buying consumer products at prices higher than they could otherwise be.
For examples of the potential change in tax inclusive prices of goods from various sectors of the economy, I have transcribed data from Dale Jorgenson's US Business sector estimates of change in production output and change in price received by producers, as percentage of 1996/97 tax law baseline case from
Jorgenson, Dale, The Economic Impact of the National Retail Sales Tax, Final Report to Americans For Fair Taxation, May 18, 1997.
Available on request from American's for Fair Taxation.
The change in total payment paid by the consumer,(assuming a 23% NRST) for consumption for each business sector has been computed using the function:
Price(consumer)% = 100*((1-Price(producer))/(1-Rate(nrst)) - 1)
and presented as the change in NRST inclusive price to a final consumer in the last column of the table.
Presuming sector goods or service are sold to a final consumer for each sector the net change to consumer is represented in the last (shaded) column. Those shaded red represent net price increases (NRST inclusive) to the consumer.
I would submit that those NRST inclusive consumer price changes are within ±5 percentage points of the values that can be expected in average change in sector prices with implementation of the FairTax legislation.
| First Year 1996 Percentage Changes from Base Line Case For Fair Tax Implementation |
|||
| Business Sector | % Change Production Quantity |
% Change in Producer Prices |
% Change in Consumer Prices |
| Agriculture | 22.8% | -22.26% | +0.96% |
| Metal Mining | 31.96% | -22.51% | +0.64% |
| Coal Mining | 13.77% | -24.63% | -2.21% |
| Crude Oil | 5.10% | -13.25% | +12.66% |
| Other Mining | 34.99% | -23.50% | -0.65% |
| Construction | 55.28% | -24.48% | -1.92% |
| Food Products | 20.79% | -22.84% | +0.21% |
| Tobbacco | 34.00% | -25.14% | -2.28% |
| Textiles | 32.58% | -23.21% | +0.27% |
| Apparel | 17.89% | -19.19% | +4.95% |
| Lumber, Wood | 53.14% | -22.51% | +0.64% |
| Furniture | 73.63% | -22.36% | +0.83% |
| Paper | 28.13% | -22.81% | +0.25% |
| Printing | 15.22% | -24.91% | -2.48% |
| Chemicals | 33.91% | -21.83% | +1.5% |
| Refining | 6.22% | -16.05% | +9.03% |
| Rubber, Plastic | 49.96% | -22.66% | +0.44% |
| Leather | 24.13% | -15.25% | +10.06% |
| Glass, Inc. | 48.25% | -22.63% | +0.48% |
| Primary Metals | 38.62% | -20.72% | +2.96% |
| Fabricated Metals | 47.29% | -23.20% | -0.26% |
| Non-electric Machine | 55.86% | -22.26% | +0.96% |
| Electric Machinery | 55.25% | -21.04% | +2.54% |
| Motor Vehicles | 60.82% | -18.53% | +5.81% |
| Other Transportation | 16.90% | -23.80% | -1.04% |
| Instruments | 24.51% | -22.89% | +1.00% |
| Miscellaneous Manufacturing | 57.57% | -17.95% | +1.07% |
| Transportation | 17.71% | -24.45% | -1.88% |
| Communication | 14.79% | -25.30% | -2.99% |
| Electric Utilities | -9.05% | -23.51% | -0.66% |
| Gas Utilities | -8.29% | -20.03% | +3.86% |
| Trade | 28.87% | -25.43% | -3.16% |
| Finance, etc. | 16.93% | -24.87% | -2.42% |
| Other Services | 12.04% | -25.43% | -3.16% |
| Government Enterprises | 18.56% | -25.57% | -3.34% |
For examples of the potential change in tax inclusive prices of goods from various sectors of the economy, I have transcribed data from Dale Jorgenson's US Business sector estimates of change in production output and change in price received by producers,But Jorgenson's model is a full employment model and allows for wages to drop. That's where most of the savings comes from. You yourself said that this can't happen (and I agree).
When the burden in tax related overhead is greater than tax revenues collected as they are under the current income tax system,Really? We are talking about businesses here. The overall tax related overhead is greater than the tax revenues collected?