Comments on: Will conservatives embrace a consumption tax? Thu, 21 Jul 2016 07:57:19 +0000 hourly 1 By: jtfane Wed, 07 Mar 2012 19:56:41 +0000 Unlike @Gordon2352 I won’t attempt to count the serious issues with this article. I will agree that their are at least two though. The most obvious of these errors is the one pointed out above regarding the statement that if “the total personal rate settles in at 44.8 percent. If the corporate rate stays at 35 percent for next year, this means the total tax on earnings passed through as dividends would be 64.1 percent.” What’s all the more amazing is that this assumption (which is stated as a cold hard fact) follows the generally accepted assumption (by nearly all economists) that “The government’s share of corporate revenues comes from dollars that would have otherwise gone to one of the following: shareholders, management, suppliers, employees or customers. This Econ 101 point is perhaps best reflected by Greg Mankiw’s argument that “a corporation is not really a taxpayer at all. It is more like a tax collector.”” What is also accepted by nearly all economists is that the burden is not shared equally amongst those groups. In fact, in the very article which you reference, Mankiw cites a study which claims that “domestic labor bears slightly more than 70 percent of the burden.” And in another recent paper from the American Enterprise Institute (a conservative think tank that has the decency and honesty to recognize itself as one) Aparna Mathur writes that “Using data on more than 100 countries, we found that higher corporate taxes lead to lower wages. In fact, workers shoulder a much larger share of the corporate tax burden (more than 100 percent) than had previously been assumed.” Yet, despite all of this you have single handedly determined that 100% of the 35% top nominal corporate tax rate (which essentially no corporation actually pays) is passed through directly to shareholders in the form of reduced dividends. The worst part though is that you state this 64.1% tax rate as fact without even bothering to mention the absurdly unorthodox assumptions you used to derive it. This is a blatantly obvious attempt to raise the hackles of your faithful followers by throwing around these ridiculously inflated, fabricated tax figures and hoping they stick. All this from the managing director of a supposed “nonpartisan policy-research institute” whose recent writing includes an article which complains in the title that “Pro-Tax Forces Sow Confusion Regarding the Top 1%” (which, BTW, conclusively knocks down the most pathetic strawman I’ve ever seen, and actually seems to go out of it’s way to avoid saying anything meaningful in the process). It would appear that you know a bit about sowing confusion yourself, Mr. Papagianis. Nonpartisan indeed.

By: masaccio Sun, 04 Mar 2012 17:35:11 +0000 So we impose a VAT tax. Prices go up, spending goes down.

How exactly does that help?

By: txgadfly Sat, 03 Mar 2012 04:36:55 +0000 It seems that every bit of tax “reform” means increasing the tax load of the median American household while decreasing the load on both organizations of all kinds and the wealthiest, most powerful people in America. That is what it has always meant.

The only thing that trickles down is excrement.

Why does no one discuss removing the “home mortgage deduction” from yachts, second houses, vacation houses, motor homes (as a second residence)? We cut Food Stamps for the poor and leave these things in place? And deductions for personal use of corporate owned aircraft? “Deferred income” and “carried interest”? And we cut Medicare? We “cannot afford” Social Security? But we cannot afford to stop charging for what “we” have no intention of providing?

Tax reform means moving the percentage of total Federal taxation as a percentage of income up as income increases. Who cares if the rich leave? Good riddance unless we let them meddle in our politics from their new homes in enlightened Paraguay. Tax benefits ought to be directly tied to the employment of American citizens. The fee for H1B visas ought to be multiplied by 10. A penalty equal to 20 years of pay should be levied on every company who brings in an H1B worker who then stays. It should not be deductible.

Stop foreign military involvement now. Deport foreigners, including ones with US “citizenship”, who meddle in US domestic politics without renouncing ties to their home countries. Ban foreign money payments to US office holders and seekers altogether. Stop the corruption. Educate our children. Feed our poor. Employ our citizens and stop being friendly with those who will not. Force foreign government debt holders to take the same percentage principle cuts as Social Security and Medicare beneficiaries.

Stop the corruption, now!

By: Gordon2352 Fri, 02 Mar 2012 22:27:37 +0000 I have two serious issues with your article:

(1) Your statement that, “if the corporate rate stays at 35 percent for next year, this means the total tax on earnings passed through as dividends would be 64.1 percent” is incorrect.

These two taxes are NOT additive.

There is NO such thing as double taxation on corporate taxes. The corporation pays taxes on profits, while the investor pays taxes on dividends. They are NOT the same thing at all.

A corporation’s dividend policy is determined by a lot of factors, with tax levels being only one of them.

(2) Your statement that “The pivot away from discussing taxes on income and toward consumption is a logical extension of the current corporate tax debate. The more you cut back deductions and broaden the base, the more the current corporate tax regime will resemble a consumption tax. In many respects, a value-added tax (VAT) is the same as a corporate tax where the only allowable deduction is for the cost of inputs (i.e., materials for production or manufacturing). Put another way, corporations are taxed on sales minus deductions today. If most or all deductions are eliminated, then just sales are left. At the risk of oversimplifying, all that really separates the corporate income tax from a sales tax are the current deductions and credits.”

This is worthless garbage. Perhaps you should not have tried to “simplify” because you obviously do not understand what you are talking about in terms of consumption taxes or VAT, since neither remotely resembles the present system of corporate taxation.

A consumption tax (i.e. a federal sales tax) would seriously inhibit US economic growth by artificially driving prices up, perhaps in a weakened economy such as ours, it might be enough to cause it to collapse.

(From Wikipedia) A value added tax or value-added tax (VAT) is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the “value added” to a product, material or service, from an accounting point of view, by this stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts, and retains the rest for themselves to offset the taxes they had previously paid on the inputs.

The “value added” to a product by a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs. A VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer. With the VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products.”

Essentially, the difference between a consumption/sales tax and a VAT is that of the difference between charging simple interest and compound interest on a loan.

Your article is so completely wrong it is not worth reading.