False. You have completely ignored the elasticities of supply and demand. The final cost is greater than Y but less than Y+L. The actual cost depends on the elasticities of supply and demand. Since the tax targeted luxuries, and luxuries have highly elastic demand, we should conclude that the cost including tax is closer to Y.
The other taxes, whether income tax or not, are built into the price of the boat.
False. Since when do taxes, or any other cost, directly impact the cost of anything? Supply and demand determine the price of the boat. As shown earlier, you ignored the elasticities of supply and demand.
If there were no "income tax" cost to build into the price of the product, then the price would be P. If you add ONLY a sales tax, then the price is P+ST.
False. This is basically a restatement of your fallacy above.
That final price, then, is the issue. Is it a price that a consumer will pay? If it is, then consumers will buy. If it isn't, then they won't.
Nice Keynesian demand-side argument you make here. But Keynesian economics, like Marxism, has been thoroughly discredited. The basic fact is that consumers still want to buy yachts (I'd like to own one myself). The problem is that the luxury (sales) tax made it so that producers weren't willing to build them. The tax harmed the *producers* who lost their jobs! That is the supply side argument.
However, there won't be tax costs hidden in the price of the yacht.
What about the producers who never paid the luxury tax? Weren't they harmed? You bet they were! They lost their jobs! Sales taxes are hidden income taxes, mighty destructive ones at that.
It will be pure production + pure sales tax. Everyone will know what is product and what is tax. As it stands now, no one knows that, do they?
Again, this statement indicates that you think price is dependent on costs, which is false. Price is dependent on supply and demand. Also, since sales taxes are also hidden income taxes, how will the producers know their tax burden? (Well, it's easy in this case. The sales tax was a 100% income tax because the producers lost their jobs.)
Rid the nation of all taxes except sales taxes and you will have CLARITY.
False. Sales taxes are hidden income taxes. Producers will not know their actual tax burden. There is always some problem with calculating tax burden, but your statement is false.
You need to acquaint yourself with certain economic terms:
supply
demand
statutory tax incidence
actual tax incidence
elasticity of demand
elasticity of supply
Above all, recognize that demand is infinite. Human nature means that we all want more than we have. Supply is limited. In order to increase wealth, we do not have to increase demand, we have to increase supply (become a supply sider!). Tax laws should be created so that they place the smallest wedge between producers and consumers. In the final analysis, this means the flat tax, not the sales tax.