[phil_will1]

"All employee taxes are counted as part of the embedded costs, including the ones the employee pays."

Incorrect. Imbedded costs are corporate income taxes, employER paid payroll taxes and associated compliance costs.

[Always Right]

Incorrect. Imbedded costs are corporate income taxes, employER paid payroll taxes and associated compliance costs.

But those don't add up to $2 Trillion. If there is $8 Trillion in consumption and 20-30% in embedded taxes, they must add up to $2 Trilliion. Even assuming a ridiculously high number for compliance cost, there is still only about $1 Trillion. The only way you can possibly get to $2 Trillion is to add in the individual tax. Really, there is no other way.

[Your Nightmare]

Imbedded costs are corporate income taxes, employER paid payroll taxes and associated compliance costs.

And who says they are embedded in prices?

Second, the corporate income taxes and employer payroll taxes as less than 5% of the prices you say will drop. That means you have to find over $1.5 trillion in compliance costs (which would be more than 3 times the amount of tax collected) in prices (not deadweight loss) to get to just a 20% price drop.

The numbers don't add up. They never have. This all stems from a misreading of Jorgenson's paper. Y'all looked at the "producer price drop" and read that to mean "embedded taxes" but didn't consider that his model had no restrictions on nominal wages.