did it?
A naive question, but what's wrong with a flat tax rate?
- Thread starter RandomPhantom700
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Good question. Answer? Unclear, or It Depends On Whom You Ask...
http://en.wikipedia.org/wiki/Bush_tax_cuts
punisher73
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I have also heard people say (might have been mentioned in this thread as well) to do away completely with income tax, and only have a national sales tax so all people would pay on what they buy.
Thoughts?
Thoughts?
In general, I like the idea. First of all, it taxes people based on consumption; they control their effective rate of taxation by controlling their consumption to the extent that they can (everybody buys food, but not everybody buys caviar). Second, it captures tax revenue at the point where the money changes hands in a retail environment; retailers already collect sales tax and remit it on a quarterly basis to the city and/or state governments. Third, it captures tax revenue from the so-called underground economy, which includes illegal aliens and drug dealers; everybody buys, so everybody pays taxes. Fourth, it completely does away with the IRS and lowers the burden on employers who now have to follow complicated tax laws to withhold taxes from paychecks.
Many states have no income tax; some have only a state sales tax. It seems to work.
This has the added advantage (for those who see the government's role as encouraging social policies through taxes, which I don't) of allowing the government to continue to encourage change via sales tax rates on different things. For example, the recent angry posts about GM's CEO stating that if the government really wanted to encourage people to buy high-MPG cars, they would raise the tax on gasoline by a buck a gallon, not simply mandate that car manufacturers meet certain fuel efficiency standards. His comment was widely misunderstood except here in Detroit, where all the car makers say the same thing. If the government simply cannot resist trying to control what people buy (high MPG versus whatever people want, like huge SUVs), then the way to do that is to encourage them to buy by making gasoline costs painful - not by forcing the makers to build cars that nobody wants.
So yeah, national sales tax. I think it would work.
well, it would make sense. You buy more (and more expensive) you pay more.
I think there is a model out put together by economists, not politicians that has something like 3 brackets and no loopholes...it would lessen the burden on most while over all increasing revenue...but I did not catch the name of the people who thought it up, makes for a frustrating time searching for it.
cdunn
2nd Black Belt
Unless you tax the purchase of financial vehicles, it ends up severely regressive. The wealthy do not spend their wealth, they invest the majority of it and live off the returns, AKA, capital gains - and with the current banker's shell games, it ends up not even counting as 'purchasing', because it's in a bank account that they can freely withdraw from, while the bank has made the investments, and just tidies over the slop.
I don't quite think that's the case. All wealth eventually gets spent. I'm not saying a billionaire spends every penny until they're broke, but that they consume retail goods and services, and at a higher rate than the common citizen. Houses, cars, food, travel, entertainment, etc. Worst case would be misers who don't spend much of their money, despite becoming richer and richer. And if you wanted to capture that tax revenue stream, then put the sales tax on the 'transaction' of inheritance. The longest a person could hold wealth and avoid taxes would be their own lifetime. And remember, to shelter it, they can't spend it. Money in the bank is the same as not having money; you cannot use it until you use it.
So the question here is this - are we concerned with capturing enough tax revenue through sale taxes to run our government and services, or are we pre-occupied with making sure that rich fat cats don't squirrel away their money and avoid 'fairness' in paying?
See, to me, that's a problem. And it doesn't matter what basis for taxation we use - flat tax, tax brackets, or sales tax. It comes down to an issue of 'fairness' for certain individuals; they can't stand the idea that some people aren't paying enough and it's not about how much is collected to pay the bills our nation must pay.
So we have to decide. Are we interested in paying the bills, reducing the deficit, balancing the budget, or would we rather ensure that we punish rich people?
OP
RandomPhantom700
Master of Arts
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My first thought is that it sounds great in a booming economy, but when the market takes a dump (i.e. now) and people start spending less, such taxes would become trickles. An example is my native State of Florida, which traditionally has relied on tourism sales taxes instead of property taxes. That's great during a boom economy, when everyone's going to MickeyLand every summer, but when belts start tightening, the state legislature suddenly finds itself working with much smaller numbers.
Relying on sales taxes rather than income taxes, I worry, would suffer a similar vulnerability.
It's always going to be a problem, no matter how you collect taxes. Tax on revenue also suffers; higher unemployment and people take pay cuts. I myself got THREE whacking big pay cuts in 2009, and yes, my taxes went down because of it. I also cut my spending...so it does harm tax generation either way.
However, you can also argue that sales tax is less affected in the sense that people may cut out trips to Disneyland, but they don't stop buying groceries or gasoline or car insurance, etc. All goods and services which could be taxed under a sales tax in lieu of an income tax. It's actually harder on the people and a bit easier on the taxing entity. Even unemployed people who get various kinds of financial aid have to buy food and gasoline and pay insurance, and so on .
Then you get into the mess of wanting to exempt basic necessities. And to define those necessities.
And if the states want to get into it, then online vendors will have to start collecting taxes based on the shipping address.
And if the states want to get into it, then online vendors will have to start collecting taxes based on the shipping address.
Steve
Mostly Harmless
I think it's worth considering. The only real issue I have with it is that the government doesn't tend to repeal taxes. The precedent for a Federal income tax has been well established, and my fear is that the Federal government would do what many States have done and simply ADD a Federal sales tax on top of everything else. Even if it included an initial drop in the federal tax, we've all seen them creep up over years. The opposite has been proposed here in Washington State, where some have proposed a limited State income tax, but we already pay among the highest sales taxes and the highest property taxes around (and the highest gas taxes and the highest... well, you get the picture.) I just don't believe for a second that the State income tax would be "limited" for very long.
Twin Fist
Grandmaster
so someone that knows about it give me a quick and dirty on the national sales tax?
The Canadian National Sales tax applies too all goods and serices with the execption of unprepared food. It is a Value Added Tax, meaning that the tax is added at every step of the handling and production chain, but i everybody but the consumer offsets tax paid with tax collected.
In essence, a manufacturer pays no tax on raw material because it is presumed that the tax chrged on the finished goods will be more than the tax paid on the raw material. It is also a way to ensure products are not inflated by the rate of tax all the way through.
what is there dirty about it:
all goods you purchase are subject to a predetermined tax.
Right now it's a communal thing, around here it varies from 8 to 10 %
Not sure how high the percentage is...Germany has that type of Tax (on top of income, property etc...) I think it's 16% bt I have not checked lately.
MPC1257
Yellow Belt
I don't have the answers regarding increasing taxes, I am more concerned that if we do increase revenues then our elected "leaders" will just increase expenses until we need more revenues. Regarding the national sales tax or VAT, I don't like it. My wife and I brought our son and nephew to Quebec City last year and it was so expensive due to their taxes that I'll never go back to Canada again.
there are expenses and there are expenses.
In a more ideal manner government decreases it's involvement in the market place when business is doing well and the economy is rolling along. That's when they ought to make reserves for the inevitable recession.
Then when the private sector is slowing, government ought to inject it's finances in order to stimulate the market.
That is naturally not done by purchasing 3600$ hammers or allowing MPs insane expense accounts, but by providing incentives for businesses or individuals. Like furthering education, or sponsoring research in new technology or something like that.
But not waste.
Not giving subsidies to booming industries or building roads to nowhere...
In the end though thee has to be a goal of monetary value behind it.
Hitler did great for a while piling all the unemployed in the countryside putting cobble stones on east bound express roads, known as the Autobahn...however noble the government had no means to actually pay the workers and without WWII (for which the roads were designed in the first place) the house of cards would have collapsed sooner or later. That is the opinion of leading economists over yonder anyhow.
I guess it's something like the hoover dam tho. Even though it's insanely expensive, there is a huge payoff to be expected in the end.
Quebec has the highest tax rate in the country. If you go to Alberta, they have no provincial sales tax, so you would see a 10% difference right there.
Cost is relevant. Prices in the US tend to be cheaper then up here, but head over to Europe if you want to see expensive.
The idea behind a national sales tax would be to replace the income tax in the USA, so a push. Of course, there is a psychological point there; people tend not to 'see' the extra money in their paychecks, but they do 'see' the higher costs when new sales taxes are added. So many people might decide that they were paying more when in fact they were not.
Sales tax does allow you to control your taxes in a way that income tax does not; paycheck earners generally cannot make their pay go up and down unless they get paid overtime (I don't) and can control how much they work. But they can cut down on unnecessary expenses, thus controlling some of the taxes they pay.
And of course, to your point about spending versus revenue, I agree. Without both Democrats and Republicans in Congress forcing a compromise, either side would bankrupt us. One with not enough taxes to pay the bills, the other with increased spending over what is taken in, no matter how much. They're complete idiots left to their own devices. We need them to oppose each other, but they also have to compromise. My opinion.
