While not precisely the same, your example from four years ago shares one major flaw with the table you posted in #311:
both use an exceedingly high number for profit as a percent of revenue. The old table used 18%, the current table uses an even more unreasonable 33%.US corporations average a profit of between 5% and 6% of revenue (before income taxes.)
The old table added tax to input cost to get price (curiously ignoring the rest of profit as a component of price.) The new table also adds tax to input cost, but also adds the entire profit on top of that. That, my friend, double counts the tax (FairTax folks seem to favor double counting ;-) Under any standard accounting procedure, tax is deducted from gross profits (PBT) to get net profit. Tax is never added to profit to get price!
This table uses the marginal tax rate ...
Nobody is suggesting a problem with the marginal tax rate, it your choice of profit at 33% of cost that is the problem (nobody who does accounting the way you have would be an accountant for very long!)
In fact the numbers reach a very conservative level asymptotically.
Not possible. The algorithm at the heart of the table you posted is a "compound interest" algorightm. It does not converge; it does not approach an asymptote. It expands indefinately and infinitely as the number of periods (levels) grows. And, most importantly it does NOT even come close to modeling the impact of tax on price!
It is the mechanism that is the thing of interest here rather than the numbers themselves.
Nice dodge; but, actually, BOTH are of vital interest:
First you have to get the algorithm right. Both tables (the one in #311 AND the one four years ago in #147) have incorrect algorithms.Second, you have to use numbers that reflect the situation you are attempting to model. Your numbers greatly exagerate the problem you are trying to illustrate.
While I agree that taxes are indeed embedded in the price of goods and services, the level of these so-called "hidden taxes" is not nearly as great as you would lead us to believe.
For that reason insisting on using only corporate taxes...
Who insisted on WHAT? What thread, what posts are you reading anyway? I have taken issue with YOUR table: it's hogwash. You appear to be the one insisting on using selecive data (incorrectly at that) and bogus reasoning.
"While not precisely the same ..."
The two examples are not only not precisely the same - they are altogether different. The example in #311 is in fact a good illustration of the MECHANISM of embedded taxes and how they build into costs as a percent of the selling price of an item. You have missed the point that this is not discussing "revenue" or using "profit" as a percent of "revenue". You seem to be put off by the fact that some of he values used are - to your way of thinking - too high.
You may have missed the explanation I gave that this was not about the values themselves (so long as they were reasonably representative), but the mechanism of the cascading.
Also, my comments relating to the example converging related to the salient element of the table which is the value "Tax costs as % of selling price". This is the element of real interest in the example and it DOES converge to a particular value that varies depending on the numbers used for what are called "profit margin" and "tax rate". I have seen other somewhat similar examples that converge fairly similarly but to higher values, while this example converges to a lower value and is even more conservative (which is why I used it). It is also not intended to be a cost accounting breakout or presentation of overhead, etc. but a simplified example to show the effects of cascading tax costs (period).
Since you took the item cost as the factor to project (with or without the drum roll) certainly that value progresses upward (which is illustrative of the effect that cascading taxes has upon item cost). But that is not the point of the example - the "tax costs as % of selling price" is the item of interest. And, also, since you seem to be so picky, "selling price" here is the price to be input to the next level and "profit margin" is the desired or net or target margin hoped for or expected within each single Level.
Level 1 starts with an input cost of $1.00 and the business wishes/expects/hopes for/desires (etc.) to realize the indicated profit margin in forwarding their "thing" to the next level. To do that, they must be able to add the tax cost expected (assumed, guessed at, etc.) for the business (called "tax rate") to the desired target "margin" (or choose your preferred term) to arrive at "sell price" (which as I've said is the input price to Level 2 ($1.44 in the example). This allows the selling of the thing involved to Level 2 while covering both their expected/projected/etc. tax rate and margin. There is no "double counting" of tax (or anything else) despite your assertion. Nor is the "tax cost" removed by L1 paying its business income taxes. The tax cost is embedded within the input and passed on as input to L2.
Once the item enters Level 2 it a distinct known-cost item insofar as Level 2 is concerned and that cost ($1.44) has embedded in it the tax costs from Level 1 which, as they pass through Level 2, cascade and have the L1 tax costs increased by the operation of he L2 parameters).
Now - if the number in the example called "profit margin" (and remember, that's just what it's CALLED in the example) is so high as to drive you into apoplectic fits, then you certainly may use another so long it is nothing like the out-of-context 5-6% of revenue you proffer. We're not talking about revenue but that's something some seem to find hard to grasp. Use a profit margin value of, say, 15% if you like but certainly that is a fairly low number compared to businesses I'm used to. Your mileage may vary.
However many Levels there might be in the inceprion-to-consumption chain, it it the "Tax cost as % of selling price" that the end consumer must pay for the embedded tax costs. And the example applies to a business in general and not to any single form of entity (as one or two posters keep insisting by trying to use Subchapter C Ccorporations - that's where the tax rate figure came from BTW). There are other business entities and they all potentially pay taxes and embed tax costs into the things they sell.
You seem to think the example refers to the VALUE of embedded tax costs. That was never what was said, nor ever the intent of the example. It does show in simplified form how the cascading of business taxes (and remember, we're not including payroll/withholding tax or compliance costs) builds up in just a few Levels. Said another way, it is not the LEVEL of embedded taxes, but the MECHANISM that is illustrated. Many people on these threads do not understand how such a mechanism works. The example may help them grasp the concept.