So ancient_geezer's prescription for Economic Happiness is to just RAISE everyone's wages. LoL. If only.
Interesting how you take the hypothetical scenario and claim it to be my position, That my friend in out of context as well as an attempt to raise a strawman.
The point of my reply being reduction of tax related overhead costs on business is the occasion for increased efficiency and productivity resulting in rising purchasing power for the household, how ever it may manifest, whether it be in price reductions, implementation of technological improvements in production of product, increased wage, return on investment to the stockholder/retirement account, and/or any combination of the forgoing.
Consumer electronics price reductions fit quite well into the economic models we have. NONE of those reductions had anything to do with tax policy.
Tell us then, what is the difference in reduction of costs from a tax relief from reduction in cost from other factor that make a difference in how that the savings in reduced costs will be applied in the quest of highest profit?
Your worst case scenario is not even close to what I foresee which is wages going up but prices going up more.
On the basis of what? Manufacturing and business overhead costs fall with the removal of the tax system currently in place misdirecting resources into economically sterile activites taking away from productive capacity.
At any rate companies select outputs to maximize profits and that will not change under FT.
Obviously, and they maximize profits by striving to find that equilibrium price that yields greatest profit, not highest possible price or wage in competative markets.
They would select the same point of production since maximum After Tax Earnings are achieved at that point whether we are taxed at 38% or 0%.
You are overlooking the fact that a change in how tax is collected is what actualized reduction of overhead costs, not changes in tax rate. Repeal of the tax system results in lower overhead by removing the misallocation of resources into non-productive tax related activities.
The increase in overall purchasing power of the individual (wage earner, investor etc.) arises from the reduction of overhead costs, as the tax revenue burden on the economy remains constant in a revenue neutral tax reform. It is the reduction of tax related overhead associated with the system replaced that gives rise to increased purchasing power by fostering more efficient and productive utilization of production facilities and resources.
While the desire for transparency is laudable we are still faced with the fact that many pay no income taxes and they will essentially pay no sales taxes after the rebates etc. are implemented. This means the drive to spend other people's money will still dominate domestic politics.
You are overlook a simple factor that operates in human behaviour. It does not matter what the source of dollars coming in is, source is disconnected at the point of expenditure where the tax itself is visible. That visibility, sticker shock for lack of a better term is the dominant factor that will drive voter percptions, not the fact that it may all net out in the wash.
And it is a singular irony that it is in the higher income and higher taxed locales which are most supportive of bigger government and higher taxes.
More often that not said locales are also the haunts of inherited wealth more than earned wealth. The latter folks remain accutely aware of the burdens extract from them. The former will indeed not change much in there ingrained habits and often guilt/status driven concerns to support the causes of government, not to mention they are also often the same folks who are inimately enmeshed in the halls of government to the point where government growth is seen as advancement of there own power and fortunes.
Fortunately that group also represents a very small sector of the voting population and their main hold in power in government is their ability to have dominant say in policy in the face of apathy and and fostered ignorance of the general electorate that has been possible under the current income/payroll tax system:
| "As a matter of fact, what the income tax does — and this is the debate that I think we always try to get into in order to let you and him fight, see — and the people of this country are led down a path where the actual control of their resources, which in the end is the control over their will, is handed off to the government." . . . "The government then manipulates that will in order to destroy the freedom of our electoral system through the income tax structure, and we call the resulting slavery a free system." "In point of fact, it is not as the founders understood, and the only way to restore real freedom is to give people back control over the income that they earn so that they won‘t, at the voting booth and in other phony issues, be subject to that manipulation." |
You were the one who brought up the pay 'em more argument not I thus I made a little fun of it. But Bigun actually bought it and is using it too.
I do not argue that there would be some relief afforded by the reduction of compliance costs but do not see it as having more than a small effect on productivity or efficiency. And there are other productivity lowering aspects you do not mention. For starters the current tax code encourages investment because of the write offs and depreciation deductions these would disappear and I can even envision the change in the code lowering investment and retarding productivity. Economics is filled with examples of counterintuitive results.
Reductions in cost through tax relief can lead to greater profitability without any necessary change in technology or investment plans and could be a one time thing. Reductions in costs due to increased competition can be the result of the forced new technologies caused by increased competition. Your question was difficult to frame and my answer is too. If this is not sufficient try again and I will also.
Everything equal implementation of the FT will increase takehome wages by the no-longer-paid employee share of SS/Medicare which is around 8% however there is going to be a 30% sales tax on purchases. FT advocates maintain that the base price is going to drop so that the final price will be no greater than the REAL price paid prior to FT. I don't believe that will happen in such a smooth and seamless manner. If I am correct the real wage will fall at least initially until the new code is incorporated in the economy. Depending upon how sticky price adjustments are it could be as much as 20% but probably around 10%. I cannot prove this but it seems logical to me. Cost declines due to compliance cost removal will at first show up in increased profits thus this decline will be a one time thing.
And we should not overlook the fact that these compliance costs are declining because of the computerization of accounting and bookkeeping. Personally I don't accept the estimates of the actual cost of compliance in any event and believe them to be overstated.
It is just that "sticker shock" which I fear will wreck the Big Ticket sectors like autos and housing. Adding a visible sales tax of almost 30% will cause demand in those sectors to collapse in my view though I understand you do not agree that will be the result. So even if you are getting a bigger paycheck you stop buying because of that ss. But IF I am correct we are screwed.
Nonsense, Chicago is no home of "inherited wealth" but a blue collar working town like most of the cities. Even NY is not some kind of Palm Beach.
Alan Keyes is not an authority on Economics and his rhetoric may make you feel good but is not an argument.