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You're kidding right? A business has the opportunity to sell the same amount of units at a lower price while eliminating wasted time contemplating the tax implications of every decision, eliminating the accounting costs, and freeing up funds and time to improve their business and they won't do it? if they don't there is another business down the street that will, and then they're OUT of business.

You're kidding, right? A business has an opportunity to trim staff no longer needed, increase profit margin, improve its P/E ratio, make its stock prices go up, and you think it is just going to give all that away?

A few businesses might let some of that go in the more competitive discount and retail sectors, but do not expect to see them rush out to dump their bottom line in the consumers' laps.

As for another business down the street, some streets are a lot shorter than you seem to think, especially in smaller towns, and more specialized business sectors.

When Walmart drove Kmart out of our town, we no longer had to watch for falling prices.

But from all accounts, wages will drop far quicker than prices.

Fixed costs will remain the same, your mortgage amount, student loans, your car loan, are not going to drop 20% just because your wages did.

New rules make it much harder to declare bankruptcy.

With so many "mining" their equity, it wouldn't take much of a bubble deflation to put them upside down in their mortgages, with less ability to pay them off. Things could spiral pretty quickly from there. More income (percentage wise) spent on mortgages and car loans means less disposable income to spend on anything else.

You are talking about deflating an entire economy.

Think about that. Think also, what that would do to GDP and our trade deficits.

Think about that. Think also, what that would do to GDP and our trade deficits.

The same report that indicates individuals will get what they do today as net income after income/payroll taxes would retain the the same purchasing power showing producer price falls 22% making the change in consumer price paid including the 23% NRST, the same as is paid today for given basket of goods and sevices.

There is no additional taxation, it is just collected on one point in the economy (at retail purchase) instead of from both business and individual income as it is under the current system.

The consequence is that businesses become more productive and competitive on internation trade, as well as within our own domestic economy, expanding both trade and GDP output.

THE ECONOMIC IMPACT OF THE NATIONAL RETAIL SALES TAX
ByDale W.Jorgenson
May 18, 1997
Final Report to Americans For Fair Taxation

INTRODUCTION AND SUMMARY

The purpose of this report is to analyze the economic impact of substituting the National Retail Sales Tax (NRST)for individual and corporate income taxes,the Medicare,Social Security, and FUTA payroll taxes,and the estate and gift taxes.1 I consider a revenue neutral substitution-one that leaves the government deficit unchanged. Finally,I focus on the impact of this fundamental tax reform on economic growth over the next quarter century.

I have summarized my conclusions in a series of charts:

1.The revenue neutral substitution of the NRST for existing taxes would have an immediate and powerful impact of the level of economic activity.The first chart gives a projection of GDP under current tax law. The second chart shows that GDP would increase by almost 10.5 percent in the first year.This increase would gradually decline to a little under 5.4 percent over the next twenty-five years.

2.Taxation of consumption would induce a radical shift in the composition of economic activity-away from consumption toward investment. The third chart shows that real investment would initially leap by a staggering 76.4 percent and then gradually fall to about 15 percent higher than under existing taxes. The third chart reveals that real consumption would initially decline by 9.1 percent. However,consumption would overtake the level under existing taxes within five years and grow rapidly under the NRST.

3.Holding net foreign investment constant,the fourth chart shows that exports would jump by 26.4 percent under the NRST, while imports would rise only modestly. This is the consequence of excluding exports from the tax base while including imports. The initial export boom would gradually subside, but exports would ultimately remain more than 13.3 percent above the level under the current tax system, while imports would fall a modest 0.9 percent below this level.