[d0ubled0wn]

Republican house speaker Denny Hastert is proposing the idea of a national sales tax to replace the income tax and axing the IRS altogether. "You could double the economy over the next 15 years" says Hastert. Bush likes the idea and may explore this idea in his *ahem* 2nd term. IOW, he's gauging the public's interest and, if popular, will use that as a theme in his campaign.

A flat tax does sound appealing to me... it wouldn't break my heart to see the IRS get axed.

[chris v]

Trial Baloon. *POP*

[chabig]

I think it would be great idea, but only as a replacement for and not in addition to the income tax. It's more moral because it taxes consumption rather than wealth creation, it cannot be escaped by criminals, everybody will experience the pride of funding of our government, it eliminates the cost of the IRS bureaucracy, and puts legions of tax prepares and attorneys to other productive work.

[dreilly1]

http://forums.macnn.com/showthread.p...hreadid=222915

I think that a national sales tax would not bring in the same amount of revenue that the current income tax does without increasing the burden on the people least able to afford it.

If somehow, by magic, we reduce the expenditures of the federal government to the point where it can be funded by a national sales tax, you might find that keeping the income tax, but reducing tax rates to match, is a fairer proposition.

Reducing spending is the key, that should come first. Oh, and nothing that benefits me should be cut, because that's Vital to our Society. All that stuff that benefits you and not me is fair game, though.

[Dr.HermanG.]

A national sales tax is the only fair way to ensure that everyone pays their share of running the government. Being poor is no excuse for not paying taxes.

I live in a state with no income tax and I love it. That means I keep more money and I ultimately choose how much tax I pay by how much I consume. Since I tend to save my money it benefits me even more while the poor saps who feel the urge to spend every dime they make are the ones getting shafted.

[CRASH HARDDRIVE]

Originally posted by chabig:
It's more moral because it taxes consumption rather than wealth creation,

Which will sledgehammer the poor, while letting the wealthy amass tax-free fortunes that don’t even require the usual pretense of being accounted for.

it cannot be escaped by criminals,

It could EASILY be escaped by average citizens, let alone criminals. Any small businessperson with a wholesale license could clean up simply by cutting out the government middle man and undercutting tax rate prices. Current tax rates aren’t high enough for this to be worth the bother- but the high rates that a NST would introduce, would be. Just as people today avoid sales taxes by simply buying products on the internet across state lines, they'd avoid them by buying on a thriving black market where the incentive for its existence and profit potential would be staggering.

And best of all for participating entrepreneurs, they wouldn't need to worry about being penalized based on all that nifty illegal income, without an IRS or income taxes to fool with. Oh wait, perhaps that little problem could be taken care of though… with a NEW and improved, even more bloated, inefficient, overburdened compliance system that’d probably make everyone pine away for the old tax code.

The amount of added law enforcement and bureaucracy that would have to fight a massive compliance war would more than dwarf whatever pretend benefit the government saw.

I predict in virtually no time, the wealthiest and most privileged (made even more so by the lack of taxes on their now no-limit incomes) who would have thriving offshore and underground tax-free connections to get what they need, would pay virtually ZERO taxes. Who needs mere loopholes when you’ve got red carpeted gateways to travel through?

Criminals have never been really big on compliance with those pesky obstacles called laws. Add to that the potential to undercut a hefty +national sales tax price, and virtually EVERYTHING could become contraband.

That would leave the middle-class and the poor to shoulder most of the tax burden. I dare say a NST could have the potential to actually be the left’s long dreamed of perfect class-envy scenario come true.

and puts legions of tax prepares and attorneys to other productive work.

It's cool though- they can all go to right back to work in the newly exploding 'national sales tax compliance industry' that’d probably dwarf their old lines of business.

[el chupacabra]

Originally posted by Dr.HermanG.:
Being poor is no excuse for not paying taxes.

actually I think the "poor" will get a huge tax break with these new tax laws too.

This I think is a bad idea. You don't really end up paying too much less in taxes if anything at all. Your taxed something like 23% on every sale, which means you still only own all but one fourth of all your money, because that one fourth you can never spend. Now everytime you go to spend money you have to be carefule to calculate how much you really will have left. I like the income tax better since they take your money before you get it so that all the money you finally get is yours to keep.

This won't improve capital or anything, its just a new and exciting fad/trend whatever to think about. If It really was going to save us money he could more easily change the current tax code to do the same.

[chris v]

Originally posted by CRASH HARDDRIVE:
Which will sledgehammer the poor, while letting the wealthy amass tax-free fortunes that don’t even require the usual pretense of being accounted for.



It could EASILY be escaped by average citizens, let alone criminals. Any small businessperson with a wholesale license could clean up simply by cutting out the government middle man and undercutting tax rate prices. Current tax rates aren’t high enough for this to be worth the bother- but the high rates that a NST would introduce, would be. Just as people today avoid sales taxes by simply buying products on the internet across state lines, they'd avoid them by buying on a thriving black market where the incentive for its existence and profit potential would be staggering.

And best of all for participating entrepreneurs, they wouldn't need to worry about being penalized based on all that nifty illegal income, without an IRS or income taxes to fool with. Oh wait, perhaps that little problem could be taken care of though… with a NEW and improved, even more bloated, inefficient, overburdened compliance system that’d probably make everyone pine away for the old tax code.

The amount of added law enforcement and bureaucracy that would have to fight a massive compliance war would more than dwarf whatever pretend benefit the government saw.

I predict in virtually no time, the wealthiest and most privileged (made even more so by the lack of taxes on their now no-limit incomes) who would have thriving offshore and underground tax-free connections to get what they need, would pay virtually ZERO taxes. Who needs mere loopholes when you’ve got red carpeted gateways to travel through?

Criminals have never been really big on compliance with those pesky obstacles called laws. Add to that the potential to undercut a hefty +national sales tax price, and virtually EVERYTHING could become contraband.

That would leave the middle-class and the poor to shoulder most of the tax burden. I dare say a NST could have the potential to actually be the left’s long dreamed of perfect class-envy scenario come true.



It's cool though- they can all go to right back to work in the newly exploding 'national sales tax compliance industry' that’d probably dwarf their old lines of business.

Bolded for emphasis.

[chabig]

Which part are you trying to emphasize? Is the emphasis for agreement or to point out fallacy?

[chris v]

Originally posted by chabig:
Which part are you trying to emphasize? Is the emphasis for agreement or to point out fallacy?

for once, I find myself in utter agreement with Crash.

[djohnson]

Originally posted by el chupacabra:
actually I think the "poor" will get a huge tax break with these new tax laws too....

How will they get a tax break if they dont currently pay income taxes?

I think this would be more "fair". Right now you get taxed on the money you make and you get taxed on the things you buy...

[BRussell]

I do kind of like the idea of a sales tax because it punishes spending rather than income, and it gives you more control over how much you pay. It would also be better for international competition.

I live in a state with no sales tax, and I think we'd be better off if we had one. I personally think I'd do better with a mix between sales and income tax rather than just income. I'm kind of thrifty and like to make fun of the $40,000-SUV-buyers and money-wasters.

But, for other reasons stated here, it's probably a bad idea overall to completely replace the income tax with a sales tax. Maybe a national sales tax accompanied by a reduction in income tax would be good, like Great Britain and many other countries.

The BRussell tax plan® is a flat tax with a high rate but a high standard deduction. Maybe a 40% rate with a $50,000 deduction for everyone. That way it's easy on the poor - no taxes at all if you make less than $50,000 - but has high taxes on the rich.

[voodoo]

....good, like Great Britain and....

Excerpt from Wikipedia:

"The United Kingdom of Great Britain and Northern Ireland is a state in western Europe, usually known simply as the United Kingdom, the UK or less accurately as Great Britain or Britain. The UK was formed by a series of Acts of Union which united the formerly self-governing nations of England, Scotland and Wales together with the province of Northern Ireland, a region on the island of Ireland (the rest of Ireland left the United Kingdom in 1922)."




GB is sooo 19th century.

[djohnson]

Originally posted by BRussell:
...The BRussell tax plan® is a flat tax with a high rate but a high standard deduction. Maybe a 40% rate with a $50,000 deduction for everyone. That way it's easy on the poor - no taxes at all if you make less than $50,000 - but has high taxes on the rich.

How is that different then now? The rich pay most of the taxes while the poor pay none or very little.

[BlackGriffen]

Originally posted by BRussell:
I do kind of like the idea of a sales tax because it punishes spending rather than income, and it gives you more control over how much you pay. It would also be better for international competition.

I live in a state with no sales tax, and I think we'd be better off if we had one. I personally think I'd do better with a mix between sales and income tax rather than just income. I'm kind of thrifty and like to make fun of the $40,000-SUV-buyers and money-wasters.

But, for other reasons stated here, it's probably a bad idea overall to completely replace the income tax with a sales tax. Maybe a national sales tax accompanied by a reduction in income tax would be good, like Great Britain and many other countries.

The BRussell tax plan® is a flat tax with a high rate but a high standard deduction. Maybe a 40% rate with a $50,000 deduction for everyone. That way it's easy on the poor - no taxes at all if you make less than $50,000 - but has high taxes on the rich.

This dichotomy between income and spending is wrong. One man's spending is another's income. The only difference is what class of goods and services are taxed. The income tax, for instance, covers labor, interest on lent money (profits from stocks can be viewed as part of this - they just have a non-defined interest rate), and gifts (a purchase of good will, if I may be so crass). Long story short, it's all just money changing hands.

For once, I agree with Crash - this is a showstoppingly bad idea.

BG

[Dr.HermanG.]

Originally posted by djohnson:
How is that different then now? The rich pay most of the taxes while the poor pay none or very little.

A sales tax would ensure that the poor pay for their government as well. Nobody deserves a free ride.

[djohnson]

Originally posted by Dr.HermanG.:
...Nobody deserves a free ride.

Agreed.

Why should someone get all of the benifits of a government without helping to support that government?

[djohnson]

1900 posts and I finally got a double post

[el chupacabra]

Originally posted by djohnson:
How will they get a tax break if they dont currently pay income taxes?

I think this would be more "fair". Right now you get taxed on the money you make and you get taxed on the things you buy...

I guess what I meant was they would get a break as in people in the poverty line are exempt from this sales tax....thats what I read in another article.

Some poor people that arn't past the poverty line might not be exempt from this tax which would really suck. So they would probably have to redefine the poverty line or instate a new tax bracket system anyway. Wealthy people hate the idea but what they don't understand is that the economy really does improve for them as well If the poor can afford to live....ie with increased cash flow in the system.

An example of who this would hurt:

I know a guy who's currently on disability, he has cancer and an amputated leg. He gets enough disability to not be considered past the poverty line, so this tax would actually be a tax increase for him and potentially break him. He still works. But he can no longer do his former high paying job. His wife has something wrong with her back so that all the employers won't hier her saying she is disabled even though the state says otherwise. Its really too bad, he has 2 college degrees, 1 a phd, she has 2 degrees also and will probably end up working some minimum wage office job.

I also wonder how Bush is going to pay for his war if this really does lower taxes (however he does it).

[BRussell]

Originally posted by djohnson:
How is that different then now? The rich pay most of the taxes while the poor pay none or very little.

The poor don't pay income tax (they don't have much income), but the middle class does. This would give the middle class (e.g., people making $50,000) more of a break than now.

But I want to point out that while the rich pay lots of income tax while the poor are largely exempt, the poor still pay lots of sales taxes and payroll taxes and other kinds of taxes. Usually when people say "the poor don't pay taxes" they're excluding lots of taxes and only focusing on federal income tax, which is obviously only one of the taxes that we pay.

[Dr.HermanG.]

Doesn't matter. Poor, middle class, or wealthy every single person should pay taxes or else move somewhere else. No. Free. Ride. For. Any. Person.

[BRussell]

Originally posted by BlackGriffen:
This dichotomy between income and spending is wrong. One man's spending is another's income. The only difference is what class of goods and services are taxed. The income tax, for instance, covers labor, interest on lent money (profits from stocks can be viewed as part of this - they just have a non-defined interest rate), and gifts (a purchase of good will, if I may be so crass). Long story short, it's all just money changing hands.

For once, I agree with Crash - this is a showstoppingly bad idea.

BG

I also agree it would be a bad idea to replace the income tax with a sales tax. But I think there are some good features to it, and a balance would probably be best.

But I'm not sure I get your point. Income taxes and sales taxes are completely different, at least on an individual level. One is based on how much money you make, and the other on how much you spend. Sure, they both end up taking money out of the economy in one way or another. But an individual who spends a lot is going to pay higher sales taxes than an individual who spends little. Right?

[villalobos]

Originally posted by djohnson:
How is that different then now? The rich pay most of the taxes while the poor pay none or very little.

As it should be.

[djohnson]

Originally posted by villalobos:
As it should be.

Why should it be like that? Both live in this country and are protected/served by it, thus they should both pay taxes.

[el chupacabra]

Originally posted by BRussell:


Income taxes and sales taxes are completely different, at least on an individual level. One is based on how much money you make, and the other on how much you spend. Sure, they both end up taking money out of the economy in one way or another. But an individual who spends a lot is going to pay higher sales taxes than an individual who spends little. Right?

No, you still pay the same amount as far as flat taxes go, whether or not its taxed before you get it (income) or after you get it (sales tax). Think about it...do a few example calculations if you wish, the government can take 23% out of your paycheck or take it out of each thing you buy...either way the government gets 23% of all your money you make. This is just a way to manipulate people into thinking they have more money before they spend it. But the purpose of money is to spend it. So even if you don't buy very much, you still only own all but 23%.

[djohnson]

Originally posted by el chupacabra:
...So even if you don't buy very much, you still only own all but 23%.

Wrong, only if you spend it all will you own all but 23% of it. If you make $50,000 and spend only $20,000 then you only lose $4600. This way the less you spend means money of the money goes in your pocket.

[BRussell]

Originally posted by el chupacabra:
No, you still pay the same amount as far as flat taxes go, whether or not its taxed before you get it (income) or after you get it (sales tax). Think about it...do a few example calculations if you wish, the government can take 23% out of your paycheck or take it out of each thing you buy...either way the government gets 23% of all your money you make. This is just a way to manipulate people into thinking they have more money before they spend it. But the purpose of money is to spend it. So even if you don't buy very much, you still only own all but 23%.

Wait a second. A 23% national sales tax wouldn't take 23% of your money, it would take 23% of your spending. If that's what you were saying. Where are you getting the 23% figure?

In any case, sure, as long as a national sales tax was revenue neutral, it would take in the same amount of money by definition. But on an individual level, different types of taxes would affect people differently depending on how they work. That was my point above about how I consider myself to be thrifty in a world of big-spenders: I think I would personally be better off if we had a sales tax rather than an income tax. Other people would be worse off than they are now. Other tax systems could shift the burden around in different ways, favoring certain people over others. If you're saying that it doesn't matter what tax system is in place, every individual would always pay exactly the same amount, I strongly disagree.

[voodoo]

Originally posted by djohnson:
Wrong, only if you spend it all will you own all but 23% of it. If you make $50,000 and spend only $20,000 then you only lose $4600. This way the less you spend means money of the money goes in your pocket.

so those who have to spend all their saleries every month are taxed 23%, while those who get more money than they need to spend can save and invest them to make more. interesting.

I don't like it though, wouldn't want to see it in my country, and I completely support what CRASH_HARDDRIVE wrote.

[djohnson]

Originally posted by voodoo:
[B]so those who have to spend all their saleries every month are taxed 23%, while those who get more money than they need to spend can save and invest them to make more. interesting.

It is very easy to live off of little. The thing is, people now assume that to be successful you must have a new expensive car, a huge house, and tons of junk. If you live modestly, you can save much even if you have little.

[Krusty]

A national sales tax is a horrible idea. CRASH , of all people, pointed out why. What's to stop me from selling a $250k Lamborghini to my buddy for $100 ? (at least on paper) and then collecting the remaining $249.9k privately from him .. thus circumventing taxation on all but $100 ? Or buying groceries from a shady seller -- who doesn't charge me any tax (but then I directly "tip" him half the federal sales tax rate). We both win, tax collection loses. Yes, these sorts of things already happen, but offloading taxes purely to sales tax would provide quite an incentive to cheats and, again as CRASH noted, would require a much more massive enforcement structure. How much harder would it be to prove that John Q. Smith bought $3000 in untaxed goods, with cash, from some guy's van during the year than the prove a payment for services (i.e. wages or other income) of $3000 ? Answer: almost infinitely more difficult to prove.

Further, consumer spending varies wildly based on consumer confidence and other factors that may not be directly related to how much money they actually have to spend. This makes planning a budget very difficult as people's spending habits can be much more volatile than their working habits. One year may see them spend $25k on a new car and $5k on computer gear, then the next few years they spend nothing beyond food and shelter.

Federal and state taxes on things such as gasoline are already in place and help make tax distribution more fair (e.g. people that drive a lot are paying gas taxes based on how much they use and people who don't drive don't pay these taxes at all) but offloading the entire kit and caboodle to sales/use tax will do nothing but discourage (legal) commerce from which the tax would be derived.

[el chupacabra]

Originally posted by djohnson:
Wrong, only if you spend it all will you own all but 23% of it. If you make $50,000 and spend only $20,000 then you only lose $4600.

What are you going to do with that money, its only good to be spent. Even if you save it for 60 years until you spend it all (assuming you will in this case), you end up giving up 23%.

You may not spend it ever in your lifetime but that just means whoever inherits it and spends it ends up paying the tax when they spend it. Therefore that tax was the govs.

This way the less you spend means money of the money goes in your pocket.

Analogy:

Lets say your Bill Gates. And you have made something like 80 billion dollars in your lifetime. You can never spend all this money so you will never pay 23% on all your money. Its in your pocket for good until you die or somehow do find a way to spend it. But what good is that? We don't yet know how investing will work with this new tax system so I can't argue anything about the power to invest it. This is like the goverment taking 23% less out of your paycheck each month but saying you owe them 23% at the end of the year....or its like them taking 23% less out of your paycheck and saying you can have more money in your pocket to carry around but if you decide to spend any of the money that they didn't tax, you have to give that 23% back. So its not really your 23% percent savings....if all you can do is save it or keep it in a bank, but not spend it.

What good is it for me to carry around more money in my pocket if the goverment will take it periodically when I spend it? You see the government may not get Bill Gates money for many many generations but money represents buying power and no matter that Bill has 80 billion, his buying power is only 61.6 billion and that buying power no matter who has it many generations from now is 61.6 billion.

BRussell
Where are you getting the 23% figure?

From the link someone posted above.

[BlackGriffen]

Originally posted by BRussell:
I also agree it would be a bad idea to replace the income tax with a sales tax. But I think there are some good features to it, and a balance would probably be best.

But I'm not sure I get your point. Income taxes and sales taxes are completely different, at least on an individual level. One is based on how much money you make, and the other on how much you spend. Sure, they both end up taking money out of the economy in one way or another. But an individual who spends a lot is going to pay higher sales taxes than an individual who spends little. Right?

Right, but look at it from your employer's point of view. The employer has to pay you more than he would have otherwise because of the tax. So, to him, it's just like the sales tax. The only difference is that sales taxes are traditionally calculated as an add on and income is calculated as a subtract off (mathematically identical using different % rates).

Also consider the retailer. The prices a retailer is able to charge are lower because of the sales tax. Perhaps not by much, but even a price difference of a couple cents is a large amount of money for a big retailer.

Now, the amount that the prices/wages have to be adjusted depends entirely upon how much they can get away with. If there's fierce competition for the job/good then the wage/price doesn't change at all, and the worker/consumer bears the burden of the tax. If there's little to no competition, then the wages increase/price decreases by the entire amount of the tax, and the employer/producer bears the burden of the tax.

So, as I hope you can see, it doesn't matter whether income or spending is taxed - what matters is what you tax. If you tax high demand goods and services, the consumer/employer bears the burden of the tax. If you tax low demand goods and services, the provider/employee bears the burden of the tax.

This is the problem with a national sales tax idea. If the tax is placed on necessities, like food, the entire burden of the tax is on the consumer. In Philadelphia, for instance, they don't apply the sales tax to groceries, just restaurants (ie food meant to be eaten on premises) and non food stuff (eg facial tissues).

BlackGriffen

[Dr.HermanG.]

Originally posted by Krusty:
A national sales tax is a horrible idea. What's to stop me from selling a $250k Lamborghini to my buddy for $100 ? (at least on paper) and then collecting the remaining $249.9k privately from him ...

What's to stop you now from buying that car for $100k and selling it privately to your buddy for $200k? You'll still make $100k profit and I seriously doubt anyone reports that as income.

There will always be ways to cheat any system we devise. What matters is what's fair and the only fair thing is to ensure that every single individual pays the exact same amount in taxes (as a percentage).

Besides, as it is now, the government relies on your employer to report your earnings. Whether the employer reports your earnings or reports his sales and pays the tax on that really isn't any different in the long run in terms of cheating the system.

Getting rid of the income tax gets rid of a huge cost in terms of payroll taxes, accounting, etc. and gets rid of the IRS off the back of individuals. Getting rid of the income tax gets rid of the many loopholes now used to subsidize the rich at the expense of the middle and lower classes. Why should I be the one to subsidize my neighbor's expensive mortgage via higher taxes when mine is paid off?

[d0ubled0wn]

Originally posted by Krusty:
A national sales tax is a horrible idea. CRASH , of all people, pointed out why. What's to stop me from selling a $250k Lamborghini to my buddy for $100 ? (at least on paper) and then collecting the remaining $249.9k privately from him .. thus circumventing taxation on all but $100 ?

Yes but where did you buy the Lamborghini? A car dealership I presume where you had to pay the sales tax. It's not right that you should charge your buddy the sales tax 'cuz that's double taxation

[Krusty]

Originally posted by Dr.HermanG.:
What's to stop you now from buying that car for $100k and selling it privately to your buddy for $200k? You'll still make $100k profit and I seriously doubt anyone reports that as income.

Did you read what I wrote shortly after that ? I know it happens to some degree today ... but putting all your eggs in the sales tax basket means exactly what you said above .. virtually all income that is legally due to the government will be of the type that can be easily avoided if someone doesn't want to report it. In other words, 100% of the government's tax revenue would be susceptible to this kind of fraud.

Originally posted by Dr.HermanG.:

There will always be ways to cheat any system we devise. What matters is what's fair and the only fair thing is to ensure that every single individual pays the exact same amount in taxes (as a percentage).

This is only true if every single individual spends exactly the same portion of their income on taxable items. A person making $1 million/yr could choose to spend less than someone making 20k/yr. This is only "fair" from a consumption standpoint, and since people on the low end of the spectrum have to spend a much larger portion of their income on necessities it will amount to a regressive tax (like FICA and Medicare). A simple, flat income tax could also be "fair" in the way you described ... guaranteeing that everyone pays the exact same amount in taxes (as a percentage).

Originally posted by Dr.HermanG.:

Besides, as it is now, the government relies on your employer to report your earnings. Whether the employer reports your earnings or reports his sales and pays the tax on that really isn't any different in the long run in terms of cheating the system.

Sure its different. In the current system, employers WANT to report your earnings because it is a tax write off for them. This underscores CRASH's point. Its much easier to prove income tax violations because one party (the employer) will have kept records of the money they paid you so they can deduct that amount. In a pure sales tax system, neither the seller nor buyer has any incentive to report or record the transaction. There's really no easy way to prove that two parties are engaging in tax-free transactions (especially if they use cash) so tax fraud would be much easier to pull-off and require much MORE federal policing to combat.

Originally posted by Dr.HermanG.:

Getting rid of the income tax gets rid of a huge cost in terms of payroll taxes, accounting, etc.

The "huge cost" of payroll taxes is what funds Social Security and Medicare. These things still cost money, whether they come out of payroll taxes or sales tax. Transferring the cost to sales tax will not result in those costs somehow miraculously disappearing.

Originally posted by Dr.HermanG.:

and gets rid of the IRS off the back of individuals.

It gets the Internal Revenue Service off their backs ... to be replaced by some sort of Internal Sales Service that performs the exact same function .. only hounding people about their purchases rather than their income ... what' s the difference ??

Originally posted by Dr.HermanG.:

Getting rid of the income tax gets rid of the many loopholes now used to subsidize the rich at the expense of the middle and lower classes. Why should I be the one to subsidize my neighbor's expensive mortgage via higher taxes when mine is paid off?

...to be replaced by other loopholes exempting certain type of purchases from sales tax, undoubtedly. Sales tax is not inherently more immune from loopholes than income tax. I can think of a couple of tax loopholes that could easily be put into the system to subsidize the rich (eg. make 2nd, 3rd, 4th,... home purchases tax free or, as it is currently in my state, have a cap on car sales tax that effectively allows more expensive cars to be taxed as a lower percentage than cheap cars *). Point being, the ills of the income tax system would not necessarily be solved by a shifting to a sales tax system ... the same problems could be pork-barreled in to the sales tax structure as they currently are in the income tax structure.


*Here, the state car tax is a whopping 6% ... up to $5000 dollars, but then is capped at a $300 maximum. So, a person who buys a used car for $5k pays 6% in tax while a person who buys a new $50k car also pays $300 -- an effective tax rate of 0.6% The state where I bought my first car had a flat 3% tax no matter what the value of the car was.

[CRASH HARDDRIVE]

Originally posted by Krusty:
A national sales tax is a horrible idea. CRASH , of all people, pointed out why.

Heh, I don’t know where all this ‘of all people’ stuff comes from. I’ve been against the idea of a national sales tax from day one. I’m the one who can’t believe the ‘tax the rich’, ‘class-envy’ crowd ever pushes for such a system.

I feel most people pay enough damn taxes, and the real problem isn’t increased taxes, but the government not wasting what it does take in. (Plenty.)

I’m in favor of (fair) taxes on income (the only logical way to have the greatest number of people comply with tax laws, plus actually keep track of who earns what.) IE: A flat rate with a graduated lower end. The truly poor should never pay income taxes.

A national sales tax however, means exactly the opposite. Taxing consumption is LUDICROUS. Contrary to popular myth, the wealthy don’t necessarily consume proportionally that much more than anyone else. Sure, you may have a few Imelda Marcos types that feel the need for 5,000 of everything, but believe it or not, the average upper middle class and ‘rich’ person DOESN’T live all that extravagantly in greater proportion to their income.

Add to this, the wealthy have and always will have more choices and alternate avenues of consumption available to them. This has been proven when tax-and-spend nitwits who don’t operate in reality have tried to levy excessive luxury taxes. People simply won’t monolithically sit back and blindly submit to someone’s stupid attempts at taxing the crap out of them when they can FIND A WAY around it. The wealthy are more likely to have the means, mobility and great incentive to do so.

Good luck trying to catch everyone at it. There’s your nightmare of impossible to enforce compliance scenario.

Meanwhile, it’s the less-mobile, non-connected, poor people who would be down at the local Jiffy Mart taking it up the shorts paying ridiculous +NST prices and having their far less substantial incomes effectively taxed into the toilet.

People in favor of a NST often tout how food will be exempt. “See? That’s great for the poor!” Yeah that’s great, except that Joe Moneybags who (believe it or not!) ALSO buys food thanks you also! I believe food makes up about 5% of total consumption, so the bone thrown to the poor ends up needing to be covered with higher consumption taxes elsewhere. Guess who’ll be paying those? Hint: NOT Joe Moneybags if he can help it- and he likely can.

The sheer ridiculousness of any argument that pretends we could have separate systems where the poor are identified at the point of sale and therefore charged one price, while the rich are charged another- it’s so laughable it goes beyond the pale. How on earth would that be enforced? And why would anyone in their right mind ID themselves as ‘rich enough to pay the tax’? If it came down to it, you’d simply have the rich hire poorer folks to do their ‘consuming’ for them at the lower rates.

I just don’t see how an NST could work in the real world. Criminals would love it. Al Capone sure as hell would have. Many rich will simply ‘opt out’ with tax-free consumption and will be free to concentrate on an un-taxed wealth creation free for all. In fact, many will use the very NST system itself to line their pockets, and really, why not? It's not like you’ll have to worry about reporting the extra income. Wealth creation is a great thing, I’m all for it- but not completely unchecked with NO taxes. That’s completely insane.

[Dr.HermanG.]

Originally posted by Krusty:
[B]Did you read what I wrote shortly after that ? I know it happens to some degree today ... but putting all your eggs in the sales tax basket means exactly what you said above .. virtually all income that is legally due to the government will be of the type that can be easily avoided if someone doesn't want to report it. In other words, 100% of the government's tax revenue would be susceptible to this kind of fraud.

If that were true then how does it magically work in states that have a sales tax but no income tax?

A simple, flat income tax could also be "fair" in the way you described ... guaranteeing that everyone pays the exact same amount in taxes (as a percentage).

A simple, flat sales tax would accomplish the same thing.

The "huge cost" of payroll taxes is what funds Social Security and Medicare.

Then get rid of them.

...to be replaced by other loopholes exempting certain type of purchases from sales tax, undoubtedly.

Why must there be loopholes? The only thing that should be exempt would be food and medicine.

[CRASH HARDDRIVE]

Originally posted by d0ubled0wn:
Yes but where did you buy the Lamborghini? A car dealership I presume where you had to pay the sales tax. It's not right that you should charge your buddy the sales tax 'cuz that's double taxation

Avoidance isn’t even this complicated. A person can purchase goods with a business license that exempts the taxes, then turn around and sell at a price lower than the added +NST price that nets a modest profit, but still nicely undercuts a legit dealer price.

[CRASH HARDDRIVE]

Originally posted by Dr.HermanG.:
If that were true then how does it magically work in states that have a sales tax but no income tax?

When it's feasible, people can already avoid those sales taxes merely by crossing a state line, either physically or via Internet sales.

As sales taxes are now, they're not high enough to make avoidance all that profitable. But in order to make the tax high enough to provide national government revenue, they're also going to be high enough to make avoidance exceedingly profitable.

Bringing up state sales taxes also brings to mind, what happens to those. Do states drop sales taxes too? Or just lump on top of the NST? Either solution brings with it a whole can of worms.

[Krusty]

Originally posted by CRASH HARDDRIVE:
Heh, I don’t know where all this ‘of all people’ stuff comes from. I’ve been against the idea of a national sales tax from day one.

I was just giving you trouble, buddy, because I generally disagree with you POV on most things. It was a joke

Originally posted by Dr.HermanG.:
If that were true then how does it magically work in states that have a sales tax but no income tax?

It doesn't magically work .. people defraud their states of sales tax due constantly (every time they buy tax free off the internet and fail to "voluntarily" report it)

Originally posted by Dr.HermanG.:

A simple, flat sales tax would accomplish the same thing.

Yet would be based on spending rather than income. A very bad and volatile formula for planning a budget based on purchasing which is far less predictable than incomes. But, yeah, otherwise it'd be similar -- so why does this make sales tax a better idea ? If its not significantly different, what's the benefit from changing it ??

Originally posted by Dr.HermanG.:

Then get rid of them.

Again ... can be done RIGHT NOW under the current system. It doesn't require that one go to a sales tax system to accomplish this.

Originally posted by Dr.HermanG.:

Why must there be loopholes? The only thing that should be exempt would be food and medicine.

There doesn't have to be loopholes. But there doesn't have to be loopholes in the income tax system either.

Point being: all the things that you say a switch to sales tax could accomplish can be accomplished under an income tax system as well (if politicians would just DO it). The only real difference is that you'd be basing taxes on consumption rather than income. Where is the advantage ??

[BRussell]

Originally posted by Krusty:
Point being: all the things that you say a switch to sales tax could accomplish can be accomplished under an income tax system as well (if politicians would just DO it). The only real difference is that you'd be basing taxes on consumption rather than income. Where is the advantage ??

That's a good point. If you want to encourage savings and discourage consumption, it wouldn't be too hard to build that into the current income tax. You could exclude income that's invested/saved, and raise the rate on the rest (which would be what you spend). That would amount to a kind of sales tax. Right now, of course, you get taxed on your income and then taxed again on the earnings from your savings and investments.

[Dr.HermanG.]

Originally posted by Krusty:
It doesn't magically work .. people defraud their states of sales tax due constantly (every time they buy tax free off the internet and fail to "voluntarily" report it)

And people defraud their states when they sell something in the paper and don't report the income either. Every system is susceptible to fraud. Do you have any evidence or studies that show that a national sales tax results in more fraud and more lost revenue?

Yet would be based on spending rather than income.

As it should be.

A very bad and volatile formula for planning a budget based on purchasing which is far less predictable than incomes.

It's far easier to lower spending than to increase income, isn't it?

The only real difference is that you'd be basing taxes on consumption rather than income. Where is the advantage ??

The advantage is that people get 100% of what they earn and then control what they spend in taxes based on what they earn. For me it means more money to save in the bank because unlike many people I don't have this need to fulfill my life by engulfing myself in material objects.

[el chupacabra]

Originally posted by Dr.HermanG.:

The advantage is that people get 100% of what they earn and then control what they spend in taxes based on what they earn. For me it means more money to save in the bank because unlike many people I don't have this need to fulfill my life by engulfing myself in material objects. [/B]

I just don't understand your point of view. What are you going to do with the money you save; you have to give it to the government if you do anything with it other then save it? Are you just going to save it forever? What is teh point of money if not to ultimatly spend it? Once anyone spends it you end up with the same about of money as under the income tax system. Your buying power is EXACTLY the same. You do not get to save extra money.

I'm about to start posting really simple equations here if its really that hard to under stand there is no benefit to this system.

it does not benefit the poor or rich it just puts a bottleneck on the cash flow

[BRussell]

Originally posted by el chupacabra:
I just don't understand your point of view. What are you going to do with the money you save; you have to give it to the government if you do anything with it other then save it? Are you just going to save it forever? What is teh point of money if not to ultimatly spend it? Once anyone spends it you end up with the same about of money as under the income tax system. Your buying power is EXACTLY the same. You do not get to save extra money.

I'm about to start posting really simple equations here if its really that hard to under stand there is no benefit to this system.

Not to be rude, but it's pretty silly not to see a difference between spending and saving. When you get your paycheck, you can go and blow it on an SUV, or save it and put it into stocks, or a new business, or a retirement fund, etc. etc. Those decisions have huge consequences for your taxes, not to mention your personal wealth. They are not the same.

[Dr.HermanG.]

Originally posted by el chupacabra:
[B]I just don't understand your point of view. What are you going to do with the money you save; you have to give it to the government if you do anything with it other then save it? Are you just going to save it forever?

Save it so I can pass it onto posterity. Otherwise, at the current way things are, the government takes its share before I even have a chance to invest it.

What is teh point of money if not to ultimatly spend it?

Security.

Once anyone spends it you end up with the same about of money as under the income tax system. Your buying power is EXACTLY the same. You do not get to save extra money.

Going from an income tax to sales tax would increase my income because most of what I spend is on things which would either be exempt (I rarely ever go out to eat) or already are taxed (gasoline).

I'm about to start posting really simple equations here if its really that hard to under stand there is no benefit to this system.

Please show me how I benefit from an income tax versus a sales tax. Assume I make $100,000 per year, one dependent aside from myself, and don't have mortgage interest to deduct.

[el chupacabra]

Originally posted by BRussell:
Not to be rude,

don't worry bout it Im plenty rude to everyone else, it wont bother me if you were.

When you get your paycheck, you can go and blow it on an SUV, or save it and put it into stocks, or a new business, or a retirement fund, etc. etc.

Ok that makes sense assuming it won't change the way money is spent or taxed on stocks, business and retirement. I wasn't accounting for investments since I don't know how that iwll change. I have a feeling it will including new service taxes (and I hate service taxes). Bush has added many service taxes and I can see having to pay more taxes to buy stock. To me the sale of a stock could be considered and end sale of a commodity. This is where another 10,000 pages of tax code would have to be written to determine what is and isnt a business transaction.

Dr.HermanG
Security.

I'd say false security since if you have 40,000 in the bank and 25% is to be taxed leaving only 30,000 in buying power, you think you have an extra 10,000. Where is income taxed boy only ever had 30,000.

Going from an income tax to sales tax would increase my income because most of what I spend is on things which would either be exempt (I rarely ever go out to eat) or already are taxed (gasoline).

Thanks this also makes sense.
If you really live that way then yes that would benefit you if you bought things that weren't taxed. Most people tend to want to spend all their money as they get older for luxury items in which case your taxed the same as income.

Please show me how I benefit from an income tax versus a sales tax. Assume I make $100,000 per year,

Assuming all things are taxed nothing exempt....
You don't benefit directly (I was saying they are the same) other than you know exactly how much buying power you really have, the government can benefit because they can enforce the old code better. The economy would be better because their would be increased cash flow not money just sitting in bank accounts waiting to be taxed once used.

If you make 100,000 a year and buy 4 $25,000 things taxes on 25%. Your taxed 6,250 on each thing. times 4 is 25,000 total tax. In income tax you are still taxed 25,000 at the end of the year. My point was it doesn't matter how much you spend your buying power is always 75,000 and that extra 25,000 is false security. so your taxed the same, but if you were exempt from some items and you never bought anyting else then that would not be the case.

[Dr.HermanG.]

Are you drunk or something?

Under the current scheme if I make $100,000 per year and am taxed at a 25% rate then I pay $25,000 or so in taxes.

Under a sales tax, assuming a tax rate also of 25%, I'd have to spend every single penny I make in order to pay the same amount in taxes.

So, tell me, where is this false security at?

[Krusty]

Originally posted by Dr.HermanG.:
Are you drunk or something?

Under the current scheme if I make $100,000 per year and am taxed at a 25% rate then I pay $25,000 or so in taxes.

Under a sales tax, assuming a tax rate also of 25%, I'd have to spend every single penny I make in order to pay the same amount in taxes.

So, tell me, where is this false security at?

You're making a ridiculous mistake with your figuring. Your 100k is only "worth" 75k in actual purchasing power. The fact that you don't spend it only puts off the point at which it is taxed, it doesn't do away with it. WHEN you spend it, its worth 75k. IF you don't spend it, it still only have 75k of potential value as it will automatically be decremented by 25% as soon as its value is realized. If its never realized, then for all intents and purposes, its worth $0. Say you go to buy stocks with your $100k. If that stock purchase is taxed, you will end up with $75k worth of stock, right ?? If you decide to spend $20k on a car, you are going to be buying a $16k car + 25% tax, capiche ?

Saying you have $100k in the bank would be exactly the same thing as saying you have $75k worth of buying power. It won't save you any money, just put off the time at which it is taxed OR, if its never taxed, then it was never used and worth nothing. Money in itself is worth nothing, only when it put to use thru purchases (be it goods, services, or even labor) does it have any real value. Your assertion that if you don't spend the money, the government will get less in taxes from you is true, but that still doesn't make the money you save more valuable to YOU than 75% of its nominal value.

[Dr.HermanG.]

Originally posted by Krusty:
You're making a ridiculous mistake with your figuring. Your 100k is only "worth" 75k in actual purchasing power.

No, based on a 25% income tax rate, I will only have $75k in purchasing power. I *don't* have a choice so by the time the government is through taking its share BEFORE I get my earnings I am only left with $75k.

The fact that you don't spend it only puts off the point at which it is taxed, it doesn't do away with it. WHEN you spend it, its worth 75k.

No, that's IF I spend it. All of it as a matter of fact in order to be left with $75k worth of purchasing power. If I took the $25k that would have gone to income taxes and invest it for the year then I'm further ahead.

IF you don't spend it, it still only have 75k of potential value as it will automatically be decremented by 25% as soon as its value is realized.

That's assuming I spend it all on taxable items. What if I never buy anything other than groceries? What if I never need to buy another car or another house?

Saying you have $100k in the bank would be exactly the same thing as saying you have $75k worth of buying power.

Only if I spent all of my money I make each year on items which would be levied with a sales tax.

[BlackGriffen]

Originally posted by BRussell:
Not to be rude, but it's pretty silly not to see a difference between spending and saving. When you get your paycheck, you can go and blow it on an SUV, or save it and put it into stocks, or a new business, or a retirement fund, etc. etc. Those decisions have huge consequences for your taxes, not to mention your personal wealth. They are not the same.

That's not technically saving. Some of those are savings accounts, which can be considered lending, others are actually purchases (eg stocks) where you spend the money. What you're calling 'saving,' and I admit your usage is consistent with the majority of people, is actually spending money to make money. Literally, saving would be putting your money in a safe or under a mattress. Spending money to make money is loaning it out, hiring someone to work for you at a job you make money on, investing, buying collectible items, etc.

So, long story short, there are three things you can do with money: money losing propositions, money making propositions, or sit on it. Don't get me wrong, though, there's nothing wrong with money losing propositions as long as they make up for the money lost in some other way that has value to the spender (eg fun, prestigious, etc). Note also that the dividing line between losing and gaining is often chance. You can lose money on stocks, for instance, especially if you don't know what you're doing.

BlackGriffen