How about a 7% increase in U.S. living standards?

[The One and Only...]

The last time I talked about replacing the income tax with a national sales tax, I was hit with a few rebuttals. I will discuss these now.

The first was that, if the sales tax would be made progressive via rebates anyway, what would be the point?

The primary benefit is increased economic growth. A consumption tax promotes saving, because all money saved would essentially be tax-deductable. Individuals saving money is something that business relies on to make investments.

This increase in growth relates to the worker in many ways. To put it simply, labor wages relate to labor productivity. Labor productivity increases with increased investment, meaning that labor wages will increase. It has been shown that nations who invest little shows smaller growth in wages.

A hidden benefit would be that Welfare could be ended. For those that needed Welfare in the past, rebates higher than the amount of taxes paid could be given. Hence, the system is more efficient and simplistic.

The increased benefit of saving would also make Social Security look less attractive, thus weakening the potential disaster of widespread failure.

The other criticism was that the tax would serve as an excuse to raise prices and screw the consumer.

This is simply not true. The national sales tax would only apply at the retail level, so prices should go down if anything (although how much would depend on several factors).

For another excellent study on the topic, read this.

[Zhukov]

To put it simply, labor wages relate to labor productivity. Labor productivity increases with increased investment, meaning that labor wages will increase.

Yeah. I hear McDonalds are paying their workers a shitload, what with all the increase in productivity and all.

Productivity affects the value of labour, not its price. An increase in productivity lowers the value of labour, without lowering the atual wage. The price of labour power fluctuates acording to supply and demand of labour on the market. In a period of expansion, as, for instance the whole period of early 50s early 70s in Australia, demand exceeds supply, so the price of labour power tends to be above its value.

[AChimp]

And I will now make fun of your rebuttals.

Originally Posted by The One and Only...

The primary benefit is increased economic growth. A consumption tax promotes saving, because all money saved would essentially be tax-deductable. Individuals saving money is something that business relies on to make investments.

And what are you defining economic growth as? Personal wealth? That's not economy, that's sitting on your bag of money. Saving is not spending, and economies are driven by spending. People stop spending, the economy goes down. People spend more, the economy goes up. It's not an inverse relationship.

And what about people who don't make enough to be able to save anything substantial. They sure as hell aren't going to be investing their money any time soon. Incidentally, investing doesn't really count as saving, ESPECIALLY when you invest in a business where there's substantial risk despite excellent ROI figures.

This increase in growth relates to the worker in many ways. To put it simply, labor wages relate to labor productivity. Labor productivity increases with increased investment, meaning that labor wages will increase.

You've got the right idea, but you're looking at it from the wrong angle. Productivity does not effect wages, unless everyone in the world is suddenly working on commissions. When you increase wages, worker productivity goes up, but only to a certain point (the point at which workers realize they are getting shitloads of money and don't really have to work hard for it, afterall).

You can't just throw money at a company and expect it to do well, and you can't just throw money at your workers and expect them to perform better.

And that gets me to my second point, productivity is defined as the ratio of outputs over inputs. Your outputs are controlled by your efficiency (which money *may* be able to help with) and effectiveness (the ability of your workers, which... <dramatic chord> really isn't affected by money afterall, like I said above).

So, since money is an input, it gets added to the bottom, and your outputs will increase just a bit... well, look at that. Your productivity ratio just went DOWN. Still don't believe me that throwing more money at a problem won't necessarily increase productivity? Look up what happened to IBM in the '60s and '70s when they figured that they could fast-track the development of one of their supercomputers by paying people more and putting more people on the project.

It has been shown that nations who invest little shows smaller growth in wages.

Yeah, but for a whole different set of reasons. Nations that don't have mountains of investment pouring in often have very different political climates, some of which is hostile to foreign investors. Just because two things happen to be true (low wages + low investment), doesn't mean that one automatically causes the other.

A hidden benefit would be that Welfare could be ended. For those that needed Welfare in the past, rebates higher than the amount of taxes paid could be given. Hence, the system is more efficient and simplistic.

Okay, let me get this straight.

Eliminate welfare and introduce tax rebates. Give people who were on welfare a bigger rebate. Well, I guess that it's more simplistic and efficient, but a rose is still a rose. Welfare wouldn't be ended, you'd just be calling it "Tax Rebate Bonus" instead.

The other criticism was that the tax would serve as an excuse to raise prices and screw the consumer.

This is simply not true. The national sales tax would only apply at the retail level, so prices should go down if anything (although how much would depend on several factors).

I can't even respond to this properly because I am laughing so much.

"Oh, but it would only be at the retail level!"

1. WHO DEFINES WHAT IS AND WHAT ISN'T RETAIL? If I go to the wholesaler, can I avoid paying sales tax? What if I set myself up as a business? Can I start buying everything through my business, and then say, "Aww shit, no one bought it from ME, so I guess I'll have to use it for myself"?

2. PRICES WOULD NOT GO DOWN.
Hypothetical Situation: Business A buys something from Business B for $10. Because this isn't a "retail" sale, no sales tax is paid or collected. Oh, but they're saving income tax! Not nearly enough to pass on any significant price reduction. You only pay income tax on profit if you're a business, and businesses love their profit so guess who keeps it all?

Business A then sells it to you, Consumer X. Business A bases it's prices on what it pays, and it just so happens that there is a 20% standard mark-up in this industry, therefore the item is on sale for $12.

Now comes the sales tax! But where should it come from??? Should you, the consumer, have to pay it, or should the business pay for it out of it's 20%? Well, that's easy to answer, at least. You, Consumer X, will pay the Y% sales tax ontop of what Business A is charging.

Regardless of whether or not the sales tax is calculated by base price ($10) or retail price ($12), you will still be paying it out of your own pocket, and therefore, THE PRICE HAS GONE UP.

Let's say there's an 8% sales tax. Now, you're either paying $12.80 for the item (base price tax), or you're paying $12.96 (retail price tax). HOW IS THAT LESS?

Nothing, absolutely nothing, along the supply chain has changed. No new costs have been introduced because nothing is a retail exchange. Business won't take a cut out of their profits, because that would just be bad capitalism.

In conclusion, I am still laughing, and think you are an even bigger moron than I did before I read this thread.

[Zhukov]

Yeah, I was going to reply to the rest BUT I LOST MY WILL TO LIVE ON THE WAY TO THE KEYBOARD.

[AChimp]

I needed a break from my homework. Stupid research proposals.

[The One and Only...]

Originally Posted by AChimp

And what are you defining economic growth as? Personal wealth? That's not economy, that's sitting on your bag of money. Saving is not spending, and economies are driven by spending. People stop spending, the economy goes down. People spend more, the economy goes up. It's not an inverse relationship.

And what about people who don't make enough to be able to save anything substantial. They sure as hell aren't going to be investing their money any time soon. Incidentally, investing doesn't really count as saving, ESPECIALLY when you invest in a business where there's substantial risk despite excellent ROI figures.

Economic growth will be defined as expansion by business for the purpose of this discussion. When more people save money, the bank's time preference goes down; hence, interest rates are lower. Businesses then take this opportunity to take loans and expand themselves. Hence, we enter a period of economic growth.

Your assumption that people saving more makes the economy go down is way off base. First, you ignore that the elimination of the income tax would help to counteract fewer purchases. Second, you ignore that consumer-goods industries affected would raise prices if demand was lowered (I will explain my lower prices comment later). Third, you ignore that consumption in certain fields rarely varies. Fourth, you ignore that the capital-goods industry would experience an increase in demand, and would greatly benefit.

The people who don't have enough money to save are the minority.

You've got the right idea, but you're looking at it from the wrong angle. Productivity does not effect wages, unless everyone in the world is suddenly working on commissions. When you increase wages, worker productivity goes up, but only to a certain point (the point at which workers realize they are getting shitloads of money and don't really have to work hard for it, afterall).

You can't just throw money at a company and expect it to do well, and you can't just throw money at your workers and expect them to perform better.

And that gets me to my second point, productivity is defined as the ratio of outputs over inputs. Your outputs are controlled by your efficiency (which money *may* be able to help with) and effectiveness (the ability of your workers, which... <dramatic chord> really isn't affected by money afterall, like I said above).

So, since money is an input, it gets added to the bottom, and your outputs will increase just a bit... well, look at that. Your productivity ratio just went DOWN. Still don't believe me that throwing more money at a problem won't necessarily increase productivity? Look up what happened to IBM in the '60s and '70s when they figured that they could fast-track the development of one of their supercomputers by paying people more and putting more people on the project.

{Applies to Zhukov as well} On the contrary, wages will rise because demand for workers rises as well. Competition for labor resources will grow. That is pretty basic.

We are using different definitions of productivity. You seem to think of productivity as static; I, dynamic. The productivity of a worker increases when he is more valuable, regardless of whether or not he is more efficient than before.

Yeah, but for a whole different set of reasons. Nations that don't have mountains of investment pouring in often have very different political climates, some of which is hostile to foreign investors. Just because two things happen to be true (low wages + low investment), doesn't mean that one automatically causes the other.

Very true, but what I meant was only referring to the expansion of business through the investment of a loan. Slower growth = less valuable worker.

Okay, let me get this straight.

Eliminate welfare and introduce tax rebates. Give people who were on welfare a bigger rebate. Well, I guess that it's more simplistic and efficient, but a rose is still a rose. Welfare wouldn't be ended, you'd just be calling it "Tax Rebate Bonus" instead.

I was referring to Welfare only in the sense of the current program.

I can't even respond to this properly because I am laughing so much.

"Oh, but it would only be at the retail level!"

1. WHO DEFINES WHAT IS AND WHAT ISN'T RETAIL? If I go to the wholesaler, can I avoid paying sales tax? What if I set myself up as a business? Can I start buying everything through my business, and then say, "Aww shit, no one bought it from ME, so I guess I'll have to use it for myself"?

2. PRICES WOULD NOT GO DOWN.
Hypothetical Situation: Business A buys something from Business B for $10. Because this isn't a "retail" sale, no sales tax is paid or collected. Oh, but they're saving income tax! Not nearly enough to pass on any significant price reduction. You only pay income tax on profit if you're a business, and businesses love their profit so guess who keeps it all?

Business A then sells it to you, Consumer X. Business A bases it's prices on what it pays, and it just so happens that there is a 20% standard mark-up in this industry, therefore the item is on sale for $12.

Now comes the sales tax! But where should it come from??? Should you, the consumer, have to pay it, or should the business pay for it out of it's 20%? Well, that's easy to answer, at least. You, Consumer X, will pay the Y% sales tax ontop of what Business A is charging.

Regardless of whether or not the sales tax is calculated by base price ($10) or retail price ($12), you will still be paying it out of your own pocket, and therefore, THE PRICE HAS GONE UP.

Let's say there's an 8% sales tax. Now, you're either paying $12.80 for the item (base price tax), or you're paying $12.96 (retail price tax). HOW IS THAT LESS?

Nothing, absolutely nothing, along the supply chain has changed. No new costs have been introduced because nothing is a retail exchange. Business won't take a cut out of their profits, because that would just be bad capitalism.

Prices in certain fields might rise, but for very different reasons than the ones you outlined. I will explain now:

1. This is a rather idiotic point. Laws would define what is retail. For the purpose of this discussion, we define retail as "the sale of goods or commodities in small quantities directly to consumers."

2. First of all, prices must be considered at the base level without taxes included.

That considered, the elimination of income tax is more than enough to lower prices through the power of competition. Think about this for a second. Two business owners are making more money than ever before because of the switch to a sales tax. The first business owner is very clever. He realizes that cutting his prices will cause those who formerly bought goods from his competitor to buy from him, ultimately gaining more money. His competitor must then either raise prices or quality in order to compete.

The reason prices in certain fields might rise is because of decreased consumption, and therefore lower demand. However, many fields rarely change in consumption: take, for example, food production. Those fields should experience a decrease in price or increase in quality, and even those fields in which prices would normally rise from increased savings would help to be counteracted (though probably not completely) by the lowering of prices from the elimination of income tax.

In conclusion, I am still laughing, and think you are an even bigger moron than I did before I read this thread.

In conclusion, I find you to lack any sense of economic understanding beyond what they taught you in 7th grade.

[AChimp]

You are still an idiot. You need special assumptions and revolutionary definitions of standard business terms (please see your retarded, yet "dynamic" view of productivity) to make your vision work, while I am using examples from stuff that's already occurred elsewhere.

So, before you read someone's report on why income tax is gay and sales tax is good, drag your ass through a few years of business school, or move to a country that has sales tax.

[The One and Only...]

Originally Posted by AChimp

You are still an idiot. You need special assumptions and revolutionary definitions of standard business terms (please see your retarded, yet "dynamic" view of productivity) to make your vision work, while I am using examples from stuff that's already occurred elsewhere.

Dynamic meaning changing. You don't even have a clue what the hell a retail sales tax is and how it has been implemented in our country already, so I don't think I need to take your shit. Look up U.S. history, not canadian.

So, before you read someone's report on why income tax is gay and sales tax is good, drag your ass through a few years of business school, or move to a country that has sales tax.

MY COUNTRY ALREADY FUCKING HAS A STATE AND LOCAL SALES TAX, AND IT HAS WORKED QUITE WELL!!! How about you drag your ass through american politics, or shut up if you have no clue what you are talking about.

Aside from that, why don't you read the article, Keynes?

[AChimp]

[The One and Only...]

[AChimp]

[The One and Only...]

[AChimp]

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