Posted on 03/19/2014 7:20:24 AM PDT by SeekAndFind
My daydream is to lock all members of Congress and the president in a classroom with a big whiteboard and not let them out until they can pass a basic test in public finance. The first thing I'd teach them about is tax incidence — who really bears the burden of a tax.
Our politicians seem to think the burden of taxes falls on those who they require to pay, as in remit or transmit or hand over or submit or mail in, the tax. This is entirely off base. Who bears the burden of (is hurt by) a tax has nothing to do with who physically delivers the payment to the government or how it's delivered.
Suppose, for example, apples are selling for $1.00 each and the government passes a law requiring apple producers to pay a 10-cent tax on each apple they sell. Also suppose that the folks buying apples are very keen on continuing to buy as many apples as they did before, even if it means paying $1.10 per apple.
In this case, the apple tax will result in a market price of $1.10 per apple, leaving the sellers netting $1.00 ($1.10 less 10 cents) per apple.
Yes, the sellers will collect the tax and deliver it to the tax authorities. But because they receive, on net, the same amount per apple, they are no worse off. The buyers, in contrast, are worse off, since they end up buying the same number of apples, but at the higher price.
So a tax that the government says and thinks is falling entirely on apple sellers ends up falling entirely on apple demanders — i.e., buyers.
Our politicians never publicly discuss tax incidence, so one must presume that they have little or no understanding of this critical issue.
(Excerpt) Read more at news.investors.com ...
Tax reform should begin with the repeal of the 16th Amendment. Then comes the repeal of ALL other taxes. Then comes the FAIR Tax.
Only if there’s only one person in the world selling apples!
So a tax that the government says and thinks is falling entirely on apple sellers ends up falling entirely on apple demanders — i.e., buyersFollowing simple logic suggests eliminating the income tax on individuals and ONLY taxing corporations would have the same result...I'm for that except most businesses are individuals NOT "corporations".
The dirty secret Kotlikoff is not saying is that if apple sellers thought you would buy the same amount of apples at a higher price, they would be selling them at the higher price now.
Cat food ain’t cheap. I’m paying $6 for ten 3oz cans of Fancy Feast for my 11 pound cat ... that’s $3.20/lb and feeds him for only five days. Imagine how much Fancy Feast gramdma would consume.
Really? That's your logic? You are mistaken, my Free Republic friend.
While you may be right by looking at the issue through a microscope, the big picture will likely reveal that - unless there is one and only one producer of a given good or service - the free market will prevail. All it takes is one competitor to lower their price by that 10% and competitive forces will bring prices down all around.
No, the first action should be to ABOLISH THE IRS... Then implement the Flat Tax or the National Sales AKA the Fair Tax
Even if there are ten people, most if not all will keep the money.
Keep telling yourself that.
Corporations cannot blithely raise their prices in the face of foreign competition, so not all tax increases can get passed to the customer.
Corporate retained income, is income to the shareholders, just in a different pocket than the shareholders other income. If all my income gets taxed, this needs to be taxed too.
On a different tack, it would be good to get rid of the double taxation on corporate dividends, putting equity holders on an equal footing with debt holders (i.e. banks).
You are a victim of the cost-push fallacy.
The price of an apple is determined by how much the buyer is willing to pay, not by what it costs the seller to bring it to market—and not by how greedy the seller is!
If some seller or seller attempts to “keep” the 10 cents, another seller or seller will take away their customers by cutting their prices.
Keep telling yourself that.
Go into business for yourself sometime and tell me know how long you last with higher prices than your competitors.
FairTax ping!
While Dr. Kotlikoff does call for abolishing the corporate income tax, as does the FairTax, and realizing that Dr. Kotlikoff is trying to educate the Congress and the public, I am disappointed that he does not finish the lesson.
Instead, he falls into the class warfare trap that has been so devastating to our society.
FairTax is the answer, both for resolving the class warfare argument and dramatically improving the US economy, as Dr. Kotlikoff well knows. He was an early supporter of consumption taxes (the NRST and FairTax), and is to be commended for staying in the FRay, but needs to remain on message.
For more information about FairTax, go to http://www.fairtax.org.
Thanks for the ping. See my post at #32.
Not so!
Competition will force prices back to $1.00.
Unless there is an apple monopoly, of course.
Actually, the 16th amendment does not have to be repealed to implement FairTax.
The FairTax supporter’s plan is to implement FairTax and then repeal 16th. Repealing a Constituional amendment takes a long time, and would delay all the benefits of FairTax with virtually no benefit to America whatsoever.
It is called “competition,” LurkeyLiarLue.
Competition makes the world go round — can’t be repealed.
Abolishing the IRS is a key element of the FairTax legislation.
First, replace the income tax with the FairTax.
Then, abolish the IRS.
Both provisions are in the legislation.
You have been called out, DoodleDawg!
Competition for market share will cause prices to level out — they may even go below $1.00, given a seller’s desire to increase sales volume and therefore, profits.
Economics 101, my FRiend, is your FRiend.
Corporations never pay taxes is THE argument!
If a corporation, or the small business person had no sales, there would be no tax consequence.
Ergo, business customers pay the income tax!
We are back to Economics 101.
I just bought a case of 36 9-lives catfood (larger cans than fancy feast & 4 flavors) for under 14 bucks @ Walmart. Buying fancy feast tiny, expensive cans for my 3 cats would make me go broke REAL quick!
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