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This is very good, it looks like the discussion is getting much more specific and realistic.
I'm sure the Fair Tax proponents have some statistical and analytical information to address some of these concerns, but we seem to be making progress in having a significantly better discussion.
Hopefully prices drop after fair tax. Because the people setting the prices aren't going to drop any prices until they see their costs go down. And when their costs do go down, they aren't going to match that drop in the prices, they are going to maximize their profits as much as they can. So prices aren't going to drop 30% to make goods match their current price. And what impact will this have on the stock market? Because price shifts like this in a company are going to have repercussions in the short-term. Even though investment in the stock market is supposed to be long-term investment, there are people who are seriously impacted by short-term adjustments.
You're right that people want to maximize profits and consequently market forces should cause prices to drop. The public would know that the cost for stores has dropped. If I drop prices at my store and others don't, I will maximize my profits because people will be looking for and will find the merchants that drop the prices. My income will increase not because I have a higher profit margin per item, but because I have a larger share of the market. The nature of the market and competition will force prices to come down or those merchants risk pricing themselves out of the market.
You're right that people want to maximize profits and consequently market forces should cause prices to drop. The public would know that the cost for stores has dropped. If I drop prices at my store and others don't, I will maximize my profits because people will be looking for and will find the merchants that drop the prices. My income will increase not because I have a higher profit margin per item, but because I have a larger share of the market. The nature of the market and competition will force prices to come down or those merchants risk pricing themselves out of the market.
To some degree, but there is a cost of goods sold aspect which will restrain price drops, it all depends on the current profit margins and what is considered acceptable by the merchants.
Is the Fair Tax going to be applied to all financial transaxtions such as stocks and bond sales, commodity furure contracts, insurance premiums and payments and all the rest? If not, then it is not fair.
Is the Fair Tax going to be applied to all financial transaxtions such as stocks and bond sales, commodity furure contracts, insurance premiums and payments and all the rest? If not, then it is not fair.
The way I understand it, any of these that are bought with current post-tax money will be taxed under the Fair Tax, i.e. insurance premiums.
what about stocks etc? Would a fair tax apply to all the buyers? Like every tIme a stock was sold? it would be interesting to see what would happen if every transaction on Wall Street hasd a 25% share going to the government. Now that would be fair.
what about stocks etc? Would a fair tax apply to all the buyers? Like every tIme a stock was sold? it would be interesting to see what would happen if every transaction on Wall Street hasd a 25% share going to the government. Now that would be fair.
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Originally Posted by GregW what about stocks etc? Would a fair tax apply to all the buyers? Like every tIme a stock was sold? it would be interesting to see what would happen if every transaction on Wall Street hasd a 25% share going to the government. Now that would be fair.
25% of the gain, or 25% of the value?
The way I understand it, only the service of the broker would be taxed. If a stock is sold, there is no tax at all. This is one reason why the FairTax is touted as being pro-investment and pro-savings.
Hopefully prices drop after fair tax. Because the people setting the prices aren't going to drop any prices until they see their costs go down. And when their costs do go down, they aren't going to match that drop in the prices, they are going to maximize their profits as much as they can. So prices aren't going to drop 30% to make goods match their current price. And what impact will this have on the stock market? Because price shifts like this in a company are going to have repercussions in the short-term. Even though investment in the stock market is supposed to be long-term investment, there are people who are seriously impacted by short-term adjustments.
I don't see a reason for repercussions on the market from price changes. I think they'll be looking at the bottom line -- whether or not a company is making money and so forth.
When you make a drastic change like switching from income tax to sales tax, at least one fiscal quarter is going to be seriously affected as companies make the transition. Companies themselves are going to impacted as they work out new fiscal reports and tax statements to even determine how profitable they are. The stock market would probably be more volatile at the very least while the transition occurs. And many companies' worth is seriously vested in their stock prices. When a company goes public, their stock becomes an additional asset, the price of their stock impacts their borrowing and expansion power. A more volatile stock market makes lenders more cautious, tightening credit and calling in loans. We're in a housing market crisis right now. All signs point to 2008 becoming a credit crisis. Trying to switch the way the federal government collects taxes in the midst of a credit crisis sounds quite risky to me, but then I'm not a finance expert, either.
DC
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