The impossibility of a Fair Tax

[charrison]

Originally posted by: And your point is still wrong. When was the last time you got a raise because your taxes went up? If you want use to belive your BS you should be netting the same amount of money are you?

Well according to your logic an entire industry should not exist. YOu know those corperate tax accounts and lawyers. The fact that these people exist, validate what I am saying.

 

[Spencer278]

Originally posted by: charrison

Originally posted by: And your point is still wrong. When was the last time you got a raise because your taxes went up? If you want use to belive your BS you should be netting the same amount of money are you?

Well according to your logic an entire industry should not exist. YOu know those corperate tax accounts and lawyers. The fact that these people exist, validate what I am saying.

No it doesn't orperate tax accounts and lawyers a ther to maximise return to investor who are effected by the tax rate and they are not for the consumers benifit.

 

[charrison]

Originally posted by: Spencer278

Originally posted by: charrison

Originally posted by: And your point is still wrong. When was the last time you got a raise because your taxes went up? If you want use to belive your BS you should be netting the same amount of money are you?

Well according to your logic an entire industry should not exist. YOu know those corperate tax accounts and lawyers. The fact that these people exist, validate what I am saying.

No it doesn't orperate tax accounts and lawyers a ther to maximise return to investor who are effected by the tax rate and they are not for the consumers benifit.

If you cant realize that taxes are a cost of doing business and they are factored into sales cost, you are naive.

 

[Bowfinger]

Originally posted by: charrison

Originally posted by: Spencer278

Originally posted by: charrison

Originally posted by: And your point is still wrong. When was the last time you got a raise because your taxes went up? If you want use to belive your BS you should be netting the same amount of money are you?

Well according to your logic an entire industry should not exist. YOu know those corperate tax accounts and lawyers. The fact that these people exist, validate what I am saying.

No it doesn't orperate tax accounts and lawyers a ther to maximise return to investor who are effected by the tax rate and they are not for the consumers benifit.

If you cant realize that taxes are a cost of doing business and they are factored into sales cost, you are naive.

You might be correct if we were discussing property taxes, VAT taxes, or similar "fixed" taxes paid by the company. We are not. Income (i.e., profit) taxes are levied against profits. They reduce profits.

Unless the company is incompetently managed, it is already selling those products which will produce the highest profits, and it is already charging the highest prices the market will bear. It cannot raise prices without hurting sales, and therefore reducing profits. It will not switch to other products since it is already pursuing its most profitable business opportunities.

Companies may choose to play tax games to shield profits from taxes, e.g., setting up off-shore front companies. This doesn't increase the price of the companies' products, but it does shift tax burden to consumers and honest companies.

The simple fact is that business income taxes are primarily "paid" by owners/investors in the form of reduced return on investment. If that's not satisfactory, their option is switching to other investments, either non-equity investments (bonds, precious metals, etc.), or, if taxes are not evenly applied to all industries, other kinds of businesses that receive more favorable tax treatment. This is, in fact, exactly what we see happening. Industries with preferential tax treatment generate higher margins, thus increasing the value of their stock somewhat. Industries heavily taxed earn smaller margins, and are therefore less valuable to investors.

In short, business income taxes do not affect product prices nearly as much as they affect stock prices, especially when some industries receive preferential tax treatment (a/k/a, corporate welfare of one form or another).

 

[charrison]

Originally posted by: Bowfinger

Originally posted by: charrison

Originally posted by: Spencer278

Originally posted by: charrison

Originally posted by: And your point is still wrong. When was the last time you got a raise because your taxes went up? If you want use to belive your BS you should be netting the same amount of money are you?

Well according to your logic an entire industry should not exist. YOu know those corperate tax accounts and lawyers. The fact that these people exist, validate what I am saying.

No it doesn't orperate tax accounts and lawyers a ther to maximise return to investor who are effected by the tax rate and they are not for the consumers benifit.

If you cant realize that taxes are a cost of doing business and they are factored into sales cost, you are naive.

You might be correct if we were discussing property taxes, VAT taxes, or similar "fixed" taxes paid by the company. We are not. Income (i.e., profit) taxes are levied against profits. They reduce profits.

Unless the company is incompetently managed, it is already selling those products which will produce the highest profits, and it is already charging the highest prices the market will bear. It cannot raise prices without hurting sales, and therefore reducing profits. It will not switch to other products since it is already pursuing its most profitable business opportunities.

Companies may choose to play tax games to shield profits from taxes, e.g., setting up off-shore front companies. This doesn't increase the price of the companies' products, but it does shift tax burden to consumers and honest companies.

The simple fact is that business income taxes are primarily "paid" by owners/investors in the form of reduced return on investment. If that's not satisfactory, their option is switching to other investments, either non-equity investments (bonds, precious metals, etc.), or, if taxes are not evenly applied to all industries, other kinds of businesses that receive more favorable tax treatment. This is, in fact, exactly what we see happening. Industries with preferential tax treatment generate higher margins, thus increasing the value of their stock somewhat. Industries heavily taxed earn smaller margins, and are therefore less valuable to investors.

In short, business income taxes do not affect product prices nearly as much as they affect stock prices, especially when some industries receive preferential tax treatment (a/k/a, corporate welfare of one form or another).

Sounds like under your plan they still affect the consumer. Just the consumer of stock, which now would affect greater than 50% of the population.

However, I would still disagree with you and say that the income tax is still built into the cost of products sold. A business would be foolish not to do so. So i would say only the poorly managed bussiness would not have the cost of income taxes built into the price of their products.

 

[Bowfinger]

Originally posted by: charrison

Originally posted by: Bowfinger

Originally posted by: charrison
If you cant realize that taxes are a cost of doing business and they are factored into sales cost, you are naive.

You might be correct if we were discussing property taxes, VAT taxes, or similar "fixed" taxes paid by the company. We are not. Income (i.e., profit) taxes are levied against profits. They reduce profits.

Unless the company is incompetently managed, it is already selling those products which will produce the highest profits, and it is already charging the highest prices the market will bear. It cannot raise prices without hurting sales, and therefore reducing profits. It will not switch to other products since it is already pursuing its most profitable business opportunities.

Companies may choose to play tax games to shield profits from taxes, e.g., setting up off-shore front companies. This doesn't increase the price of the companies' products, but it does shift tax burden to consumers and honest companies.

The simple fact is that business income taxes are primarily "paid" by owners/investors in the form of reduced return on investment. If that's not satisfactory, their option is switching to other investments, either non-equity investments (bonds, precious metals, etc.), or, if taxes are not evenly applied to all industries, other kinds of businesses that receive more favorable tax treatment. This is, in fact, exactly what we see happening. Industries with preferential tax treatment generate higher margins, thus increasing the value of their stock somewhat. Industries heavily taxed earn smaller margins, and are therefore less valuable to investors.

In short, business income taxes do not affect product prices nearly as much as they affect stock prices, especially when some industries receive preferential tax treatment (a/k/a, corporate welfare of one form or another).

Sounds like under your plan they still affect the consumer. Just the consumer of stock, which now would affect greater than 50% of the population.

First, it's not a "plan", it's an explanation of how this actually works. Second, there is no way you can credibly claim that the "sales price" of "goods" is equivalent to decreasing the price of stocks. They are entirely different.

However, I would still disagree with you and say that the income tax is still built into the cost of products sold. A business would be foolish not to do so. So i would say only the poorly managed bussiness would not have the cost of income taxes built into the price of their products.

I've already explained why this isn't the case. Rather than addressing this, you continue to cling to your prior misconceptions. I realize this is not intuitive. Nonetheless, you will find it is generally accurate. Absent artificial price controls, competent businesses will price their products to yield the greatest possible profits. That does NOT change, whether those profits are taxed or not. If the businesses could increase profits by charging more, they will already be doing so to generate maximum profits.

If you have evidence to show this is not true, please share it. Simply repeating that you don't believe it isn't terribly persuasive.

 

[charrison]

Originally posted by: Bowfinger
I've already explained why this isn't the case. Rather than addressing this, you continue to cling to your prior misconceptions. I realize this is not intuitive. Nonetheless, you will find it is generally accurate. Absent artificial price controls, competent businesses will price their products to yield the greatest possible profits. That does NOT change, whether those profits are taxed or not. If the businesses could increase profits by charging more, they will already be doing so to generate maximum profits.

If you have evidence to show this is not true, please share it. Simply repeating that you don't believe it isn't terribly persuasive.

YOur right, the goal is maximum profits. I agree. But if a companies goal is to net $100m(and many companies do set such goals), their tax load must be taken into account on that. I would say the common practise is to price the cost of the tax into the end product.

YOu have to yet to show show proof that your explaination is valid as well.

AT this point, we will have to agree to disagree.

 

[Bowfinger]

Originally posted by: charrison

Originally posted by: Bowfinger
I've already explained why this isn't the case. Rather than addressing this, you continue to cling to your prior misconceptions. I realize this is not intuitive. Nonetheless, you will find it is generally accurate. Absent artificial price controls, competent businesses will price their products to yield the greatest possible profits. That does NOT change, whether those profits are taxed or not. If the businesses could increase profits by charging more, they will already be doing so to generate maximum profits.

If you have evidence to show this is not true, please share it. Simply repeating that you don't believe it isn't terribly persuasive.

YOur right, the goal is maximum profits. I agree. But if a companies goal is to net $100m(and many companies do set such goals), their tax load must be taken into account on that. I would say the common practise is to price the cost of the tax into the end product.

YOu have to yet to show show proof that your explaination is valid as well.

AT this point, we will have to agree to disagree.

I'm sorry, but your position makes no sense. You are suggesting a company would intentionally avoid maximizing profits if it paid no income taxes. Your hypothetical company could price its products to net $110M, but it will lower prices to net only $100M since it doesn't pay income tax. That simply does not happen. If it can net $110M it will, taxes or not. Yes, companies have sales and revenue targets. I can guarantee you that any (rational) company that can beat those targets will do so.

Any competently managed company will price products to maximize profits ... period. They will not intenionally price for smaller profits just because they aren't taxed on them. I'm sorry to be so repetitive, but you simply haven't offered any evidence or even an explanation of why a company would fail to set prices to maximize profits.

If you can support your reasoning, I'm sincerely interested.

 

[charrison]

Originally posted by: Bowfinger

Originally posted by: charrison

Originally posted by: Bowfinger
I've already explained why this isn't the case. Rather than addressing this, you continue to cling to your prior misconceptions. I realize this is not intuitive. Nonetheless, you will find it is generally accurate. Absent artificial price controls, competent businesses will price their products to yield the greatest possible profits. That does NOT change, whether those profits are taxed or not. If the businesses could increase profits by charging more, they will already be doing so to generate maximum profits.

If you have evidence to show this is not true, please share it. Simply repeating that you don't believe it isn't terribly persuasive.

YOur right, the goal is maximum profits. I agree. But if a companies goal is to net $100m(and many companies do set such goals), their tax load must be taken into account on that. I would say the common practise is to price the cost of the tax into the end product.

YOu have to yet to show show proof that your explaination is valid as well.

AT this point, we will have to agree to disagree.

I'm sorry, but your position makes no sense. You are suggesting a company would intentionally avoid maximizing profits if it paid no income taxes. Your hypothetical company could price its products to net $110M, but it will lower prices to net only $100M since it doesn't pay income tax. That simply does not happen. If it can net $110M it will, taxes or not. Yes, companies have sales and revenue targets. I can guarantee you that any (rational) company that can beat those targets will do so.

Say $100M is the net target and that tax on that is $10M. Target gross revenue becomes $110M and prices are adjusted accordingly. This is not rocket science. Companies are going to pass the cost onto the consumer whenever possible.

 

[charrison]

linkage

When we think about government spending, and the taxes needed to finance its spending, we should also think of the effects of taxation.

Suppose I hire you to repair my computer. The job is worth $200 to me and doing the job is worth $200 to you. The transaction will occur because we have a meeting of the mind. Now suppose there's the imposition of a 30 percent income tax on you. That means you won't receive $200 but instead $140. You might say the heck with working for me -- spending the day with your family is worth more than $140.

You might then offer that you'll do the job if I pay you $285. That way your after-tax earnings will be $200 -- what the job was worth to you. There's a problem. The repair job was worth $200 to me, not $285. So it's my turn to say the heck with it.

This simple example demonstrates that one effect of taxes is that of eliminating transactions, and hence jobs. But politicians have what we economists call a zero elasticity vision of the world. They think people will behave after taxes just as they behaved before taxes and the only effect of a tax is to bring in more revenue. Here's a question for you: Would we and society be better off if you and I agreed to the repair job but did not tell anybody? I'd say yes, but we'd be criminals.

Someone who knows a little more about economics than either one of us.

 

[Bowfinger]

Originally posted by: charrison

Originally posted by: Bowfinger
I'm sorry, but your position makes no sense. You are suggesting a company would intentionally avoid maximizing profits if it paid no income taxes. Your hypothetical company could price its products to net $110M, but it will lower prices to net only $100M since it doesn't pay income tax. That simply does not happen. If it can net $110M it will, taxes or not. Yes, companies have sales and revenue targets. I can guarantee you that any (rational) company that can beat those targets will do so.

Any competently managed company will price products to maximize profits ... period. They will not intenionally price for smaller profits just because they aren't taxed on them. I'm sorry to be so repetitive, but you simply haven't offered any evidence or even an explanation of why a company would fail to set prices to maximize profits.

If you can support your reasoning, I'm sincerely interested.

Say $100M is the net target and that tax on that is $10M. Target gross revenue becomes $110M and prices are adjusted accordingly. This is not rocket science. Companies are going to pass the cost onto the consumer whenever possible.

You are missing the point. If the company can price its products to increase net revenue to $110M, it will. It's not going to leave potential profit on the table just because it's not being taxed. It will still set prices to produce maximum profits. If a company's prices are already set to yield maximum profits, it cannot raise them to offset taxes without hurting profits.

I really don't see how you support your position. Do you disagree that competently-managed companies will already set their prices to maximize profits? If so, how can they raise them again without hurting profits? What am I missing?

 

[aidanjm]

Originally posted by: aidanjm

Originally posted by: ECUHITMAN
I appreciate anyone in favor of this Fairtax idea to explain how it is fair and why they are in support of it.

I oppose it, but I guess I'll comment any way.

The working class and middle class spend a much greater percentage of their total income on basic necessities (food, gas, rent) compared to the mega-wealthy, agreed? It seems to me therefore that a consumption tax on things like food, gas, rent could lead to the working & middle classes paying a higher percentage of their income as tax than the wealthiest citizens in the country. (I'm assuming the government would reduce income tax, IF this so-called "fair" consumption tax was introduced.) I personally don't think that is the kind of 'fairness' that would benefit society overall. I'm sure that extremely wealthy individuals would disagree with me. I tend to suspect that these types of taxes represent the "thin end of the wedge" of a raft of fairly radical changes in tax law... there is a 'push' among certain conservative intellectuals in the USA to introduce a so-called "flat tax", where every individual pays the same percentage of income as tax. I.e., what these people want is the end of the so-called "progressive tax" (a system where the wealthiest, most blessed individuals put a greater percentage of their income back into the community as tax than do the less fortunate). I would be concerned that a flat tax, combined with a consumption tax (such as this so-called fair tax) would massively alter the distribution of wealth in the USA. Perhaps you might end up with a situation where the wealthiest individuals are paying less tax than ever before (at least, less tax than they have paid in the last 50 years or so) and the poor, working class, and middle classes paying a much greater proportion of income as tax than they are now. I'd expect the inequality between the wealthiest and poorest citizens to sky-rocket under such a system. The USA already has the greatest inequality between the richest and poorest citizens than any other first world nation.

 

[Bowfinger]

Originally posted by: charrison
linkage

When we think about government spending, and the taxes needed to finance its spending, we should also think of the effects of taxation.

Suppose I hire you to repair my computer. The job is worth $200 to me and doing the job is worth $200 to you. The transaction will occur because we have a meeting of the mind. Now suppose there's the imposition of a 30 percent income tax on you. That means you won't receive $200 but instead $140. You might say the heck with working for me -- spending the day with your family is worth more than $140.

You might then offer that you'll do the job if I pay you $285. That way your after-tax earnings will be $200 -- what the job was worth to you. There's a problem. The repair job was worth $200 to me, not $285. So it's my turn to say the heck with it.

This simple example demonstrates that one effect of taxes is that of eliminating transactions, and hence jobs. But politicians have what we economists call a zero elasticity vision of the world. They think people will behave after taxes just as they behaved before taxes and the only effect of a tax is to bring in more revenue. Here's a question for you: Would we and society be better off if you and I agreed to the repair job but did not tell anybody? I'd say yes, but we'd be criminals.

Someone who knows a little more about economics than either one of us.

There are at least a couple of fundamental problems with this example (aside from it being a simplistic example):

First, it assumes the repairman will do nothing if he is taxed. If he does nothing, he earns nothing. If he wants to earn, he must work. If the market will not bear his $285 target price, he must lower his expectations to what the market will bear. It is simple supply and demand. The repairman, if he is financially competent, will set his rates to the highest amount that keeps him busy full time. If his rates are too low, he is busy but leaves money on the table. If his rates are too high, he is not busy because there is less demand for his services.

Second, this example (and the author's other example re. cigarettes) are examples of direct taxes on goods/services, NOT indirect income taxes on profits. Yes, companies will factor the cost of production into determining whether they can sell a product profitably (having already determined the pricing that will yield maximum profits). Business income taxes are levied against profits, not sales. They are NOT a cost of production.

If this hypothetical repairman decided his business was not profitable enough after taxes, he has a few options. He can work harder, doing more jobs to increase his income. He can expand his business by hiring more repairmen, increasing his personal profits by collecting a cut of his employees' sales. He can switch jobs, upgrading his skills to something with higher demand, and thus, higher rates. Someone who expects lower profits will soon step in to fill his former role. Or, finally, he can do nothing, sitting on his butt whining about how "high taxes" are robbing him instead of taking responsibility for his own financial success.

 

[charrison]

Originally posted by: Bowfinger

Originally posted by: charrison
linkage

When we think about government spending, and the taxes needed to finance its spending, we should also think of the effects of taxation.

Suppose I hire you to repair my computer. The job is worth $200 to me and doing the job is worth $200 to you. The transaction will occur because we have a meeting of the mind. Now suppose there's the imposition of a 30 percent income tax on you. That means you won't receive $200 but instead $140. You might say the heck with working for me -- spending the day with your family is worth more than $140.

You might then offer that you'll do the job if I pay you $285. That way your after-tax earnings will be $200 -- what the job was worth to you. There's a problem. The repair job was worth $200 to me, not $285. So it's my turn to say the heck with it.

This simple example demonstrates that one effect of taxes is that of eliminating transactions, and hence jobs. But politicians have what we economists call a zero elasticity vision of the world. They think people will behave after taxes just as they behaved before taxes and the only effect of a tax is to bring in more revenue. Here's a question for you: Would we and society be better off if you and I agreed to the repair job but did not tell anybody? I'd say yes, but we'd be criminals.

Someone who knows a little more about economics than either one of us.

There are at least a couple of fundamental problems with this example (aside from it being a simplistic example):

First, it assumes the repairman will do nothing if he is taxed. If he does nothing, he earns nothing. If he wants to earn, he must work. If the market will not bear his $285 target price, he must lower his expectations to what the market will bear. It is simple supply and demand. The repairman, if he is financially competent, will set his rates to the highest amount that keeps him busy full time. If his rates are too low, he is busy but leaves money on the table. If his rates are too high, he is not busy because there is less demand for his services.

Second, this example (and the author's other example re. cigarettes) are examples of direct taxes on goods/services, NOT indirect income taxes on profits. Yes, companies will factor the cost of production into determining whether they can sell a product profitably (having already determined the pricing that will yield maximum profits). Business income taxes are levied against profits, not sales. They are NOT a cost of production.

If this hypothetical repairman decided his business was not profitable enough after taxes, he has a few options. He can work harder, doing more jobs to increase his income. He can expand his business by hiring more repairmen, increasing his personal profits by collecting a cut of his employees' sales. He can switch jobs, upgrading his skills to something with higher demand, and thus, higher rates. Someone who expects lower profits will soon step in to fill his former role. Or, finally, he can do nothing, sitting on his butt whining about how "high taxes" are robbing him instead of taking responsibility for his own financial success.

So you refute what someone with a phd in economics(and well a well respected on at that) has to say about taxes being pushed to the consumer. I have nothing further to ad to this thread at this point.

 

[dmcowen674]

Originally posted by: ECUHITMAN
Topic Title: The impossibility of a Fair Tax
Topic Summary: Rich get richer, poor get poorer and middle class goes away.

But that's what the American Sheeple voted for and want, what's the problem???

 

[Dissipate]

Originally posted by: charrison

Originally posted by: Bowfinger

Originally posted by: charrison
linkage

When we think about government spending, and the taxes needed to finance its spending, we should also think of the effects of taxation.

Suppose I hire you to repair my computer. The job is worth $200 to me and doing the job is worth $200 to you. The transaction will occur because we have a meeting of the mind. Now suppose there's the imposition of a 30 percent income tax on you. That means you won't receive $200 but instead $140. You might say the heck with working for me -- spending the day with your family is worth more than $140.

You might then offer that you'll do the job if I pay you $285. That way your after-tax earnings will be $200 -- what the job was worth to you. There's a problem. The repair job was worth $200 to me, not $285. So it's my turn to say the heck with it.

This simple example demonstrates that one effect of taxes is that of eliminating transactions, and hence jobs. But politicians have what we economists call a zero elasticity vision of the world. They think people will behave after taxes just as they behaved before taxes and the only effect of a tax is to bring in more revenue. Here's a question for you: Would we and society be better off if you and I agreed to the repair job but did not tell anybody? I'd say yes, but we'd be criminals.

Someone who knows a little more about economics than either one of us.

There are at least a couple of fundamental problems with this example (aside from it being a simplistic example):

First, it assumes the repairman will do nothing if he is taxed. If he does nothing, he earns nothing. If he wants to earn, he must work. If the market will not bear his $285 target price, he must lower his expectations to what the market will bear. It is simple supply and demand. The repairman, if he is financially competent, will set his rates to the highest amount that keeps him busy full time. If his rates are too low, he is busy but leaves money on the table. If his rates are too high, he is not busy because there is less demand for his services.

Second, this example (and the author's other example re. cigarettes) are examples of direct taxes on goods/services, NOT indirect income taxes on profits. Yes, companies will factor the cost of production into determining whether they can sell a product profitably (having already determined the pricing that will yield maximum profits). Business income taxes are levied against profits, not sales. They are NOT a cost of production.

If this hypothetical repairman decided his business was not profitable enough after taxes, he has a few options. He can work harder, doing more jobs to increase his income. He can expand his business by hiring more repairmen, increasing his personal profits by collecting a cut of his employees' sales. He can switch jobs, upgrading his skills to something with higher demand, and thus, higher rates. Someone who expects lower profits will soon step in to fill his former role. Or, finally, he can do nothing, sitting on his butt whining about how "high taxes" are robbing him instead of taking responsibility for his own financial success.

So you refute what someone with a phd in economics(and well a well respected on at that) has to say about taxes being pushed to the consumer. I have nothing further to ad to this thread at this point.

Having a PhD in economics is almost meaningless. Mainstream econmics is in a complete state of confusion, and most mainstream economists do not even know what is up, down, left or right. Case in point was Keynes, one of the most influential economists of the 20th century. We know now that his theories were completely false.

 

[3chordcharlie]

You don't have to assume a zero-elasticity theory of economics to evaluate the effects of taxes; every market has elacsticities, and every tax creates dead-weight loss from transactions which are not completed with taxes, but woud have been otherwise.

People, however, do act the same way with or without taxes; they just act in different market conditions, meaning they make different choices based on the same preferences (assuming rationality; which is not a very good assumption, but good enough for this argument).

 

[charrison]

Originally posted by: Dissipate

Originally posted by: charrison

Originally posted by: Bowfinger

Originally posted by: charrison
linkage

When we think about government spending, and the taxes needed to finance its spending, we should also think of the effects of taxation.

Suppose I hire you to repair my computer. The job is worth $200 to me and doing the job is worth $200 to you. The transaction will occur because we have a meeting of the mind. Now suppose there's the imposition of a 30 percent income tax on you. That means you won't receive $200 but instead $140. You might say the heck with working for me -- spending the day with your family is worth more than $140.

You might then offer that you'll do the job if I pay you $285. That way your after-tax earnings will be $200 -- what the job was worth to you. There's a problem. The repair job was worth $200 to me, not $285. So it's my turn to say the heck with it.

This simple example demonstrates that one effect of taxes is that of eliminating transactions, and hence jobs. But politicians have what we economists call a zero elasticity vision of the world. They think people will behave after taxes just as they behaved before taxes and the only effect of a tax is to bring in more revenue. Here's a question for you: Would we and society be better off if you and I agreed to the repair job but did not tell anybody? I'd say yes, but we'd be criminals.

Someone who knows a little more about economics than either one of us.

There are at least a couple of fundamental problems with this example (aside from it being a simplistic example):

First, it assumes the repairman will do nothing if he is taxed. If he does nothing, he earns nothing. If he wants to earn, he must work. If the market will not bear his $285 target price, he must lower his expectations to what the market will bear. It is simple supply and demand. The repairman, if he is financially competent, will set his rates to the highest amount that keeps him busy full time. If his rates are too low, he is busy but leaves money on the table. If his rates are too high, he is not busy because there is less demand for his services.

Second, this example (and the author's other example re. cigarettes) are examples of direct taxes on goods/services, NOT indirect income taxes on profits. Yes, companies will factor the cost of production into determining whether they can sell a product profitably (having already determined the pricing that will yield maximum profits). Business income taxes are levied against profits, not sales. They are NOT a cost of production.

If this hypothetical repairman decided his business was not profitable enough after taxes, he has a few options. He can work harder, doing more jobs to increase his income. He can expand his business by hiring more repairmen, increasing his personal profits by collecting a cut of his employees' sales. He can switch jobs, upgrading his skills to something with higher demand, and thus, higher rates. Someone who expects lower profits will soon step in to fill his former role. Or, finally, he can do nothing, sitting on his butt whining about how "high taxes" are robbing him instead of taking responsibility for his own financial success.

So you refute what someone with a phd in economics(and well a well respected on at that) has to say about taxes being pushed to the consumer. I have nothing further to ad to this thread at this point.

Having a PhD in economics is almost meaningless. Mainstream econmics is in a complete state of confusion, and most mainstream economists do not even know what is up, down, left or right. Case in point was Keynes, one of the most influential economists of the 20th century. We know now that his theories were completely false.

This is the best you can? Attempt to invalidate any economists that disagrees with you?

 

[Bowfinger]

Originally posted by: charrison
So you refute what someone with a phd in economics(and well a well respected on at that) has to say about taxes being pushed to the consumer. I have nothing further to ad to this thread at this point.

Whatever. Your response is a cop-out. (No, really. I am shocked an economist in Capitalism magazine would claim income taxes shouldn't be levied on businesses. Knock me over with a feather.)

You found one PhD parroting the standard dogma for his political agenda For every one like him, there are just as many Economics PhD's who will present contradictory positions. You continue to evade addressing the points I raised ... or the gaping hole in your theory. I accept your concession.

 

[charrison]

Originally posted by: Bowfinger

Originally posted by: charrison
So you refute what someone with a phd in economics(and well a well respected on at that) has to say about taxes being pushed to the consumer. I have nothing further to ad to this thread at this point.

Whatever. Your response is a cop-out. (No, really. I am shocked an economist in Capitalism magazine would claim income taxes shouldn't be levied on businesses. Knock me over with a feather.)

You found one PhD parroting the standard dogma for his political agenda For every one like him, there are just as many Economics PhD's who will present contradictory positions. You continue to evade addressing the points I raised ... or the gaping hole in your theory. I accept your concession.

One very well respected economist.....and you have yet to provide any that support your claim.

 

[IronMentality]

If we went back to the Reagan years, where tax revenues after falling under Jimmy Carter (when he raised taxes) and Reagan brought in $800B more with tax cuts (and don't even try to to talk about the budget deficit -- Reagan left a $550M surplus as a two-term governor of California, and the Democrats that controlled the House and Senate never gave him the spending cuts he wanted or otherwise he would've left a $110B surplus in 1989. Under Reagan, the poor paid _no taxes_ more people were moved up into higher income brackets than during any other adminstration. We also had record median incomes in this country, that not even Bill Clinton could match. The flat tax would leave MORE MONEY in the hands of poor and middle class people to take advantage of other Bush adminstration proposals such as a no dividend tax (currently there is only a 15% tax on dividends) smaller capital gains taxes for investing, therefore creating wealth. Lower taxes have always proved higher revenues -- and a flat tax would surely provide a boost to the economy. To suggest the rich get richer and the poor get poorer is ridiculous -- the last time we had progressive tax systems (Carter Adminstration) the richer got richer and the poor did in fact get poorer.

 

[aidanjm]

Originally posted by: charrison

Originally posted by: Dissipate

Originally posted by: charrison

Originally posted by: Bowfinger

Originally posted by: charrison
linkage

When we think about government spending, and the taxes needed to finance its spending, we should also think of the effects of taxation.

Suppose I hire you to repair my computer. The job is worth $200 to me and doing the job is worth $200 to you. The transaction will occur because we have a meeting of the mind. Now suppose there's the imposition of a 30 percent income tax on you. That means you won't receive $200 but instead $140. You might say the heck with working for me -- spending the day with your family is worth more than $140.

You might then offer that you'll do the job if I pay you $285. That way your after-tax earnings will be $200 -- what the job was worth to you. There's a problem. The repair job was worth $200 to me, not $285. So it's my turn to say the heck with it.

This simple example demonstrates that one effect of taxes is that of eliminating transactions, and hence jobs. But politicians have what we economists call a zero elasticity vision of the world. They think people will behave after taxes just as they behaved before taxes and the only effect of a tax is to bring in more revenue. Here's a question for you: Would we and society be better off if you and I agreed to the repair job but did not tell anybody? I'd say yes, but we'd be criminals.

Someone who knows a little more about economics than either one of us.

There are at least a couple of fundamental problems with this example (aside from it being a simplistic example):

First, it assumes the repairman will do nothing if he is taxed. If he does nothing, he earns nothing. If he wants to earn, he must work. If the market will not bear his $285 target price, he must lower his expectations to what the market will bear. It is simple supply and demand. The repairman, if he is financially competent, will set his rates to the highest amount that keeps him busy full time. If his rates are too low, he is busy but leaves money on the table. If his rates are too high, he is not busy because there is less demand for his services.

Second, this example (and the author's other example re. cigarettes) are examples of direct taxes on goods/services, NOT indirect income taxes on profits. Yes, companies will factor the cost of production into determining whether they can sell a product profitably (having already determined the pricing that will yield maximum profits). Business income taxes are levied against profits, not sales. They are NOT a cost of production.

If this hypothetical repairman decided his business was not profitable enough after taxes, he has a few options. He can work harder, doing more jobs to increase his income. He can expand his business by hiring more repairmen, increasing his personal profits by collecting a cut of his employees' sales. He can switch jobs, upgrading his skills to something with higher demand, and thus, higher rates. Someone who expects lower profits will soon step in to fill his former role. Or, finally, he can do nothing, sitting on his butt whining about how "high taxes" are robbing him instead of taking responsibility for his own financial success.

So you refute what someone with a phd in economics(and well a well respected on at that) has to say about taxes being pushed to the consumer. I have nothing further to ad to this thread at this point.

Having a PhD in economics is almost meaningless. Mainstream econmics is in a complete state of confusion, and most mainstream economists do not even know what is up, down, left or right. Case in point was Keynes, one of the most influential economists of the 20th century. We know now that his theories were completely false.

This is the best you can? Attempt to invalidate any economists that disagrees with you?

It's an 'appeal to authority' logical fallacy. Instead of addressing the argument at hand, he switches the subject of discussion to the worthiness of someone's qualifications. Instead of refuting the argument point by point, he seeks to discredit the person making the argument. I.e., it's an ad hominem, it's a sleazy approach to debate, but it's something I've come to expect from so-called libertarians like Dissipate.

 

[kranky]

Originally posted by: aidanjm
It seems to me therefore that a consumption tax on things like food, gas, rent could lead to the working & middle classes paying a higher percentage of their income as tax than the wealthiest citizens in the country. (I'm assuming the government would reduce income tax, IF this so-called "fair" consumption tax was introduced.)

Under the proposal I read, the FairTax would completely replace the Federal income tax.

 

[piasabird]

26% seems a little high. The problems with corporations is they get too many breaks for opening a new facility or from tax shelters. I read an article a while back that claimed most corporations get away with not paying half the tax they owe.

 

[tellsek]

YOur right, the goal is maximum profits. I agree. But if a companies goal is to net $100m(and many companies do set such goals), their tax load must be taken into account on that. I would say the common practise is to price the cost of the tax into the end product.

The price of a good should already be set to acheive maximum profits w/o regard to taxes. Profits = Quantity of good sold x Price of the good - expenses(taxes). Maximum profits assumes that the price of a good is set at the best point to generate the most revenue between price vs quantity. If you raise the price any higher then the quantity sold will decrease thus reducing revenue and maximum profits.

If the company could increase the price any more without decreasing quantity sold and thereby increasing revenues, it simply would have done so already. It wouldn't have waited for taxes to be imposed to do so.