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Just for completeness sake, Let's agree that the part of the dollar the business got from the customer that the business used to pay the employee part of the FICA taxes is NOT given to the employee (even though it is not part of the employees gross wage statement, some have argued that the employee should get that amount anyway). Since the business no longer pays any taxes, that amount also becomes surplus and is subject to disposal at the needs of the business as discussed in the prior post.

If the business is a labor intensive business it might have 80% of its costs tied up in labor, 10% tied up in capital, investment, and other misc. costs, and the same 10% profit as before. In addition to the 3% savings on profit tax elimination, the business has another surplus part of the dollar received from the customer because the payroll tax is eliminated (that's wages + employer paid payroll tax = 80% of the dollar from the customer.)

Doing the requisite math puts the employer payroll tax at 5.7% of the customer dollar. Add the two together and the total ELIMINATED direct tax cost is 8.7% (not quite near the 23% you keep claiming is in there.) The only way to get to 23% is by the elimination of some of the labor cost (eg. firing the tax accountant.)

Realizing the missing 14.3% means that labor costs, remembering we already eliminated the cost of the employee part of the payroll tax, have to drop to 60% of the customer dollar (With the original labor cost at 80%, the employee part of the payroll tax represented 5.7%, leaving 74.3% for gross wages. 74.3% less the need 14.3% yields 60%)

That translates into a 20% labor force reduction.

Now I'm not saying that is good or bad, I'm just pointing out that the price reductions through cost reductions and tax redirection will come with another kind of price tag: there is no free lunch.

Pardon me: The fourth paragraph above should read:"

Realizing the missing 14.3% means that labor costs, remembering we already eliminated the cost of the employer part of the payroll tax, have to drop to 60% of the customer dollar (With the original labor cost at 80%, the employer part of the payroll tax represented 5.7%, leaving 74.3% for gross wages. 74.3% less the need 14.3% yields 60%)

Fortunately since the employee and employer parts of FICA are equal, the math, and therefore analysis and conclusions above remain the same.

Neal Boortz has stated that this isn't a tax cut. It is a way to levy taxes in a more efficient and fair manner. Many who are paying nothing will now pay. The IRS, and the tremendous cost of funding that institution will disappear. Foreigners will now pay taxes in America, regardless of how long they stay, or what their status is. People disagree on the 23%. Fair enough. Boortz and Linder used the brains of many economists to write this book. I tend to believe his numbers. I guess that's where we disagree.