From: niepornt@phoenix.Princeton.EDU (David Marc Nieporent)
Subject: Re: Citizens for Tax Justice (was Re: Jerry Brown's Tax)
Originator: news@ernie.Princeton.EDU
Organization: Princeton University
Date: Mon, 6 Apr 1992 18:40:36 GMT

In<1992Apr6.171650.25690@udel.edu> lintz@fred.cis.udel.edu (Brian Lintz) writes:
>In <6APR92.02212324@umbc2.umbc.edu> williamf@umbc2.umbc.edu writes:

>>>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?  

>This is how it works in Europe, maybe, but as I said, it is a tax on
>the profits of business. A business takes its income, deducts the costs
>of materials, etc, and multiplies by 13%, and that is how it will pay
>taxes. Either Clinton doesn't understand this, or yes, he's been lying.

Why should we believe this, when this isn't the way it works in any
other country in the world?

>>>Some people claim that the 13% will be passed on, but there are 2 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.

>But its not 13% regardless of losses. The tax is on the PROFITS. If
>there less profits, there is less tax to pay; if there is no profits,
>there is no tax to pay.

I don't believe that this is true, though, and neither did CTJ, which,
despite what some Brown supporters are trying to say, is NOT a
conspiracy and does not favor Clinton.

>>>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. 

>Ok, but people with lower income also use a large part of their income
>toward rent, which cannot be deducted now, but will be able to be deducted
>under Brown's system. Also, there will be no Social Security tax, no 
>gasoline tax, no other federal taxes except for the so-called "sin" taxes
>on alochol and cigarettes.

THEN HOW THE HELL IS BROWN GOING TO PAY FOR EVERYTHING?  He's going to
add, by everyone's estimate $200 BILLION to the deficit.  When they ask
Brown about it, he just waves his hands and mutters "peace dividend," as
though (1) that isn't already half spent and (2) it weren't smaller than
the *current* deficit.

Oh, I forgot, details aren't important.  We should trust him.

>Brian Lintz
>lintz@udel.edu

-- 
David M. Nieporent              |ALEast 92: 1.Baltimore 2.Boston 3.Toronto
niepornt@phoenix.princeton.edu  |4. Detroit 5.Milwaukee 6.NY 8.Cleveland
"Baseball stathead, and card-carrying member of the ACLU.  And proud of it."