From: williamf@umbc2.umbc.edu
Subject: RE: Citizens for Tax Justice (was Re: Jerry Brown's Tax)
Organization: University of Maryland Baltimore County
Date: Mon, 6 Apr 1992 02:21:23 GMT

In a previous article, lintz@fred.cis.udel.edu (Brian Lintz) wrote:
>In article <1992Apr4.134235@IASTATE.EDU> sylveste@IASTATE.EDU (Timothy J Sylvester) writes:
> 
>>Could some one from the Brown campaign create a post card tax form and post it
>>to the network. (It should be easy, just ask Jerry.) Everyone could figure out
>>how much in taxes they would pay under the current tax code and Jerry Brown's
>>tax plan. It would be a great press hit on April 15. 
> 
>All you have to do to figure out how much you would pay under Brown's
>tax plan is the following: take your income, subtract rent or home mortage,
>subtract charitable contributions, and multiply the result by 13%. 
>Very simple, as promised.
> 
>>Of course you would have to calculate the Value Added Tax.
> 
>Despite what Clinton says the Value Added Tax is NOT a sales tax,
>it is a tax on the profits of business. 

  You mean Clinton was REALLY lying to us all along?  Again?  The VAT 
  in Europe & Britain is tacked right onto the list price.  The customer
  pays it at the POS and the retailer is responsible for collecting it and
  forwarding it to the government.  That surely appears to be a sales tax 
  to me.  How is going to differ in the US?  

>Some people claim that the 13% will be passed on, but there are two arguments 
>against this. First, right now businesses pay a corporate tax of 35%, which 
>they would no longer pay under Brown's system. Do they pass this 35% on
>to the customer? If they do, then they will only pass on 13% instead
>of 35% under Brown's system. If they don't now, what makes you think
>they will under Brown's system? 

   Brown's 13% figure, I have heard, didn't simply come out of thin air.  It 
   was a CBO figure calculated several years back.  Back then it was noted 
   that very few companies pay the prevailing corporate tax given the plethora
   of tax write-offs and deferred income opportunities that are available to
   businesses.  Hence the actual average corporate tax was closer to 13%.
   If every business had to pay 13% on income regardless of losses the 
   incentive to pass on the tax is GREATER under the flat tax than under the
   current system since individual companies could no longer create artificial 
   losses or claim development credits etc. or practise pricing policies based
   on tax planning.

>Second, the market determines the price of the item. If a business could 
>raise its prices by 13% and still turn a nice profit, don't you think they 
>would? They won't raise their prices if people stop buying their product 
>because it costs more than they're willing to pay.

  Well obviously this argument works only if the average business does pay
  pay a higher tax than 13%.  But here is a twist on part of your argument.
  One of the reported problems with the flat tax is that it is regressive.
  Well, the lower income you are the greater the portion of your income which
  goes to basic subsistence items like food and clothing and fuel and those
  item's prices are basically inelastic IMO.  We (taxpayers) pay massive 
  farm subsidies on a range of crops from alfalfa to sugar to wheat which
  props those prices up.  The same is true for the US and European textile 
  industries and largely so for fuel prices too.  I don't believe that simply
  because of tax simplification protected industries in America are going to
  say, ok, forget the price supports, new producers are going to enter the
  market, we can compete on the world market fairly, blah, blah,...NOT

  Jerry Brown IS a smart guy but his tax proposal doesn't favor his natural
  base of support and eventually his supporters are going to figure that out.
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