Here's a very COMMON MISCONCEPTION:
I have talked to a few people about the Fair Tax and when I
mention the taxes embedded in products that will go away, thus
reducing the prices of products, I hear things like, "Yeah, right.
Their taxes may go down but there's no way companies will pass the
savings on to the consumer who is already used to paying the higher
price."
In a market where there is no barrier to entry, when a firm or a
group of firms make a [economic] profit that goes beyond the normal
operating cost (normal profit which includes salaries, dividends,
etc.), it creates incentive for other firms to enter the market.
All things being equal, the demand for the product being constant,
larger the number of new firms entering the market, lower the prices
that can be charged by the new firms (assuming no product
differentiation). If the newer firms are offering less for the same
product, older firms already in the market need to lower their
prices accordingly or it will lose market share.
One more thing ---- price gouging is actually a positive thing since
it creates stimulus for other firms to enter the market to take
advantage of the large profit (price gouging). But larger the
number of new firms entering the market, lower the long term prices,
and larger the supply.
People who doesn't understand economics think that price gouging in
vaccines or oil was wrong, when in fact, that was the best thing to
happen because if it was allowed to continue, supply would have
increased.
Here's a simple intuitive example. Suppose there was a disaster
which destroyed all the electrical circuits in your area, and
there's only one electrician in town. There would be large demand
for his services, which would drive his hourly wages up. If the
incident was isolated to this particular area and electricians in
other town realized that they could make several times more offering
services at one-electrician-only town, they would start offering
services there (from nearby town), driving up the supply of
available electricians. In the long term, prices would drop and
equalize at normal equilibrium.
Where did you cut and paste this from, Chug?
And why did you feel the need to post this in two different threads?
If you can't do more than repeat the talking points that are sent to you in group email, then don't bother...
Cycloptichorn
Hmmm... I don't recall seeing any comments on Franks repeated posting of the NYT's article condemning Bush... Strange...
Jesus, this is a copy of the other thread where JW said the same thing!
As I said there: I didn't see Frank post those in real-time. Therefore; nothing was said about it.
I do find it rather unsurprising that you took the same tack as JW did; rather than attempt to defend the actions of those you agree with, you point to someone else's actions as justification. A typical republican tactic.
Cycloptichorn
Re: Mason jars & matress stuffing
chugalugalug wrote:The money of tycoons isn't kept in mason jars and/or stuffed in matresses. That isn't their style. All money whether in bank deposits, stocks, bonds, annuities, mutual funds, etc., etc. is destined to finally find its way into capital investment.
Even though it is your money, the money institution holding it for you will channel it into interest bearing loans of some kind. It will end-up as capital investment in someone else's hands.
The same, of course, could be said for the money that ends up in the hands of the government. Indeed, the government is far less likely to put its money into the equivalent of a mason jar buried in the back yard than is your average tycoon. As such, this is as much a justification for
raising taxes as it is for lowering them.
the u.s magazine 'BusinessWeek" recently published an interesting article bemoaning the fact that the new u.s. immigration rules make it more difficult for foreign scientists /engineers and students to enter the united states. they gave numbers showing a surprising drop of immigration from these professionals and students. they stated that u.s. businesses will suffer if immigration is not increased soon for these applicants. they claim that there are simply not sufficient scientists/engineers and students in the u.s. to fill the vacancies. far from warning of a 'yellow peril' , they worry that these people will find other countries around the world offering them a chance and that america will be the loser. hbg
This tax would encourage people to buy goods in other countries, and possibly sell them on. How would this tax of yours deal with people buying one or two items just beyond the border? Would they be taxed reentering entering the states?
Re: Mason jars & matress stuffing
joefromchicago wrote:chugalugalug wrote:The money of tycoons isn't kept in mason jars and/or stuffed in matresses. That isn't their style. All money whether in bank deposits, stocks, bonds, annuities, mutual funds, etc., etc. is destined to finally find its way into capital investment.
Even though it is your money, the money institution holding it for you will channel it into interest bearing loans of some kind. It will end-up as capital investment in someone else's hands.
The same, of course, could be said for the money that ends up in the hands of the government. Indeed, the government is far less likely to put its money into the equivalent of a mason jar buried in the back yard than is your average tycoon. As such, this is as much a justification for
raising taxes as it is for lowering them.
Right, Joe, and anyone who has studied economics in school and some of those have degress in economics will verify that the government has to spend the tax money somewhere. Where does a lot of it go? Back into the economy. Do we all want to work for the government or for private enterprises like Halliburton who benefit from government spending? That's a question many American citizens can answer who directly or indirectly get a paycheck from government spending of tax money.
The government is extremely inefficient, my aunt works at a governemnt hospital, she does virtually nothing and make about 40,000 a year. She tells me this. "I just play Solitaire most of the time" were her exact words. This is a widespread phenomenon. In governemnt, 10 people are doing the work that one reasonably intelligent and organized individual could do. "Dont work too hard" is the beauracrats motto. A hard working beauracrat(oxymoron?) makes others look bad and they and soon learns to be a bum. Thats the problem with the governemnt, it is huge, inefficient and very expensive. They tax us, chop off 30-40-50 percent or more for their redundant "administative costs" and toss the rest into military or social engineering programs. We in the private sector get shafted, and they get their cushy government job with benefits and a pension.
This is a widely misunderstood area of taxation and international trade (it seems that it's misunderstood in congress as well!!!). Anyway, I'm not as eloquent about this issue as some of the tax and trade experts out there, but the below article should interest you.
www.taxanalysts.com
I also tried to find an online copy of the Auerbach article referenced in this article, but I haven't yet been successful. It's a good read if you can find it.
Enjoy
Looks like stop learning should stop learning and go work for the government. Your aunt isn't going to prove that all government employees sit around twiddling their thumbs. This is not what was stated -- Halliburton, for instance, is not a part of the government (well, that's debatable). The company I worked for in the 80's sold aircraft instrument panels to the military so in essence I worked for the government and I assure you I wasn't able to play Solitaire. The military industrial complex which Eisenhower criticized is working in hyper-drive. As to Solitaire, I just left a consultation job at a gallery where there wasn't enough to keep me busy so guess what I did on the computer at an excellent per hour compensation. As far as spending money on administration and bureaucracy, this administration has enlarged the bureaucracy to new highs.
Tax Hypocrisy: Kerry Makes the Case for Fundamental Tax Reform
by Richard W. Rahn
WebMemo #600
October 28, 2004 | printer-friendly format |
Senator John Kerry keeps telling us that "the rich" need to pay more in taxes, and he proposes to raise the marginal tax rate that Americans with earnings in the two top tax brackets would pay. But the small amount that Kerry and his wife paid last year in taxes demonstrates the error of this approach. Under Kerry's own plan to "tax the rich," his and his wife's average tax rate would increase to only 15.2 percent, far less than many small-business owners and middle-class earners would pay. This discrepancy is an artifact of today's convoluted tax code. In short, the Kerrys' own tax return makes the case for fundamental tax reform.
The Senator, for Example
Senator Kerry and his wife are among the 400 richest Americans. Last year, they paid only 13.4 percent of their declared $5.5 million income in federal taxes.
Estimates of the Kerrys' worth range from a low of $700 million to a high of $3.2 billion. How much income would you expect a billion dollars to produce? The Kerrys reported $5 million in income, which is a return of only about one-half of 1 percent, which is far lower than the return on even U.S. government securities.
How could this be? Like many wealthy Americans, the Kerrys have at their disposal a variety of legal means to keep income off of their tax returns and to keep the tax rate on their reported income low. Many of these loopholes are the result of tax policies that aim to reward or punish certain behavior with incentives and sanctions.
These policies make the tax code extremely complex, and their interactions and frequent vagueness benefit those with the means to employ extremely sophisticated tax-planning strategies. Conversely, this complexity disadvantages ordinary taxpayers, few of whom have the time or ability to navigate thousands of pages of tax code regulations, up-to-the-minute legal decisions, and administrative explanations and memoranda.
Kerry's running mate, Senator John Edwards, must have the same tax adviser. Last year, Senator and Mrs. Edwards paid an average tax rate of only 5.1 percent on their reported $434,000 of income, or less than one-third of the rate that the average taxpayer pays.
The Senator's Tax Plan
For those concerned about tax equity?-that is, that all Americans pay their fair share in taxes?-working within the confines of the existing tax system is extremely limiting. Raising marginal rates on the rich, for example, will not necessarily result in the super-rich paying markedly higher rates or even as much, as a percentage of actual income, as middle-class taxpayers.
So, in effect, any proposal to raise the top marginal rate is not really a proposal to increase taxes on those who are already rich, whether through inheritance, hard work, luck, or marriage, but a proposal to increase taxes on those who are trying to become rich. Those who have already achieved wealth, by whatever means, can tax shelter much of their income, but those with little in the way of assets find it almost impossible to shelter their earnings from taxes.
Senator Kerry's tax plan exemplifies this difficulty. Kerry proposes to raise the marginal tax rates that apply to income above $200,000. But what effect would this have on the actual taxes paid by the very wealthy? According to an analysis by the Argus Group, a respected tax law and economics firm, the Kerrys' average tax rate would only increase by 1.8 percentage points to 15.2 percent under the senator's plan. At the same time, many small-business owners would see their average rate rise by 4.0 percentage points, resulting in effective rates as high as 35 to 40 percent, including certain deduction phase-outs.
In other words, by proposing to raise the top marginal rates, Senator Kerry implicitly embraces a system of taxation under which he and his wife and other established, wealthy families pay an average tax rate that is less than half of what many young professionals and small-business owners, many of whom may possess few or no assets, have to pay. This fact should give any tax-equity advocate pause.
The Case for Fundamental Reform
No doubt unintentionally, Senator Kerry makes a strong case for fundamental tax reform, and specifically a flat tax or consumption tax.
Under a flat tax, all Americans, regardless of income level, pay the same percentage of their income in taxes. A flat tax minimizes the complexity of the tax code, eliminating the sort of loopholes that are today so valuable to those who can afford sophisticated tax planning.
Another option for tax reform is the consumption tax, under which savings and investment are excluded from income and only consumption is taxed. Economic efficiency would be enhanced because people would be taxed only on what they take out of the economy rather than on what they put into it.
Municipal bonds, a favorite investment tool of the wealthy, are already treated this way under the tax code, but few other investments are. As a result, most Americans investing their money are doubly taxed: once on their income and again on the investments that they make with that income. Just like the wealthy, all investors should be able to avoid double taxation.
In addition to promoting tax equity, a flat or consumption tax would stimulate an additional supply of labor and capital, which would result in much higher economic growth and lower unemployment to the benefit of all Americans.
As Senator Kerry's own experience so aptly demonstrates, today's tax code advantages the wealthy at the expense of those trying to better their lots. And as his proposal to raise taxes on the rich demonstrates, working within the confines of today's tax code is no way to fix the problem. Only a flat rate, whether under a flat income tax or a consumption tax, would ensure that all taxpayers?-even the wealthy and even Senator and Mrs. Kerry?-pay their fair share.
Richard W. Rahn is a Visiting Fellow at The Heritage Foundation.
