National retail sales tax offers alternative to filling out those damned forms

I agree. This is basically a consumption tax, which I think is a better way to tax. This would cause many Americans to start conserving by doing things like repairing clothes, driving cars until they die, and recycling where possible. This could have the side benefit of improving the environment without a single restriction being placed on business or industry.

The only thing I would like to see in place is an exemption of perhaps $5000 for every American. You would get a tax exemption card that you would swipe for purchases you wanted to exempt. In addition, certain products (medicine, food, and most other things that are exempt from sales tax today) should be nontaxable.

Overall, though, I think it makes far more sense to tax consumption rather than income. We would get the maximum motivation to earn whatever we wanted and would also have a strong motivation to evaluate every purchase for the possible tax implications.

 

I agree 100% with a consumption tax, but there are many obstacles:

1. How do you administer, especially a exemption or threshold? People are complaining about having to carry a ID but what happens when you are forced to carry your card with you every place you go to make every purchase?
2. What is the cost to implement? Imagine every business (even vending machines) would have to be equipped with scanners to read your cards and a system has to be developed in the background to track who is buying what.
3. Privacy - Just think of all the big brother talk then since all your purchases would be tracked in one system.
4. Black market - Would be alive and well if there was a 23% tax.
5. What do you tax? If all new products taxed at 23% then what about services? How to define new product and sales (namely if ABC corps who sells cars suddenly can come up with a 3 month lease program, then sold the cars after they were returned they could potentially avoid collecting taxes since a lease would not be a sale and a 3 month old car would not be new)
6. Home Purchases - Would the American Dream be over since tax advantages for owning a home (itmizing deductions) be over? And could you imagine paying 23% on a new home purchase?
6. Equitable - This is coming from a single male, but is it fair that a family of 6 pays sales tax on all purchases except $5000 (or whatever the exemption is) whil I also don't pay sales tax on everything except $5000. Point is the current tax system has alot of advantages to families and especially children (EIC, depensdent care, exemptions, filing status deduction, etc) and under this system it sounds like that would be eliminated. Think of it this way. If I make $80k per year and I'm single and my neightbor makes $80k/year and has a family of 6 and we lived similar lifestyles who is going to spend more money? Would people be ok on shifting the tax burden from people who make money and are frugal to people who make money and have to spend it to support a family?

Again I would love a consumption tax. It would encourage savings, but I would be surprised to ever see it happen.

 

The only time you would have to have your exemption card is when you were making a purchase that you wanted to exempt. Most people (in the middle and lower classes) would probably use their exemption early in the year. If you don't want to carry your card, that is fine but if you buy something new, you will pay the consumption tax.

Every business already has a credit card scanner, we could implement the cards like existing credit cards to utilize the infrastructure that is already in place.

As far as implementation cost, it would be a da#n sight less than enforcing the income tax.

I wouldn't have all purchases tracked, just the ones that an exemption is used on and even then just to verify that people are not somehow cheating the system to get a bigger exemption than they are entitled to. After that year, there is no reason to keep the data and it could be purged.

This is a small concern when only new purchases are taxed. Used goods would have a legal, untaxed status and finding people selling new goods outside the tax system should be relatively easy.

Obviously there are a lot of considerations like this, but details would be hammered out as a part of creating the system.

I would exempt up to the first $75-100,000 of every home.

Maybe we should make it $5000 for each adult and $1000 for each child, but again the exemption (amounts and application) are details that would be hammered out as a part of the process.

I would love it if our tax system encouraged people to save their money rather than spending it. I believe that this would be the first step to making Social Security obsolete.

As with most good ideas, I highly doubt that the current class of politicians will be able to see past their war chests to implement it. This is especially true because the tax code gives them the ability to reward the people who pay for their election with tax breaks. We will probably have to have publicly funded elections first.

 

Hellllo Internet purchases from Canada.

I'd hate to be a waiter or bartender the first year or two of this program. Talk about poverty.

 

While people would have a lot more in their pocket, they'd also be a lot less inclined to spend.

I think that the economy would spiral down as people kept all of the money in their pockets....then they wouldn't have any money in their pockets as the companies that employed them had to lay them off.

 

Just like it has in Europe since they enacted Value Added Taxes, huh?

That is a rhetorical question, the VAT has not significantly impacted the economies of the countries that have enacted it.

 

Consumption taxes are the most regressive of all taxes -- hitting middle and low income families the hardest.

Million dollar bonus? No tax for you. Invest as you choose or go spend it in the Bahamas.

Buy jeans for your kid? That'll be 23% please.

And the IRS will remain. Somebody has to oversee the collection and remittance of the tax. And interpret how it is applied.

The exemptions will remain. Taxes are political. They serve social and political goals as well as financial ones. Low income -- no tax. Exemption for school supplies maybe? House purchase? Medical supplies? Oil and Gas exploration equipment (just how did George sneak THAT one in?? ).

Forget the social goals.

No such thing as donation receipts? Retirement plans lose their attractiveness (OK for the person who'll save anyway -- not so great for those who spend all they earn. And we'll need some program to help them when they need it...assuming we don't just kick them to the curb -- welcome back Social Security).

And loop-holes and special deals? We'll find some. Only on the final sale of new goods, you say? Warantees, exports and imports, service contracts, goods for resale -- there'll be lots of things to interpret.

Cool idea.

Very hard to implement. Likely no less complicated than an income tax could (and should) be. And very very regressive in nature -- shifting the tax burden from higher earners to lower earners.

 

VAT did not replace income taxes.

It's not much different than sales taxes currently in place in many States.

 

Couple of things about your national sales tax:

(1) Once you add all your "exemptions" like houses, food, medicine, etc... you're not looking at a 25% sales tax. You're looking at something closer to 40%. And that's assuming people don't start saving more... the more they save, the higher your tax rate will need to be, and the slower the economy will be.

(2) Be prepared to start spending a LOT more in social services. Sales taxes are regressive, even with these exemptions. Someone who makes $1,000,000/yr spends a lot less of his or her income than someone who makes $30,000. You're going to have the poor suffering the most and needing even more support than they get now.

(3) Your luxuries industry will get destroyed. A 40% sales tax on a $100,000 car? People will just go to Canada, buy it there and drive it back to save $40,000. This just hurts sales for American businesses.

Sales taxes are nice because they sound so simple... but there's a good reason we don't actually ever consider implementing them on a national scale.

 

I just briefly scanned over the replies, so forgive me if I am being repetitive..... but if the only tax that would exist in this country was a FINAL sales tax, why wouldn't I just buy 90% of the things I need/want from a foreign country and almost all together avoid paying anykind of tax/premium?

 

Here's a few other issues:

Are businesses taxes on their purchases? How do you encourage a business to buy resources from America when they can get tax free items from another country? Do you tax business services like CPA's, attorney's, etc? Who collects the tax and credits it to the right person/business?

What is exempt? IMO, some necessities should be tax free and there should be ways to purchase needed items like school supplies, diapers, required healthcare, food, etc. without having to pay tax. A consumption tax that doesn't exempt some necessities of life is incredibly unfair to impoverished people.

There are also issues of things that may have been affordable previously if you could write them off of your taxes for business purposes that no longer would be. I would have to assume that many items normally purchased and considered a business write-off would not be purchased and that could suppress a lot of industries dependent upon business spending.

Lastly, how do you handle distribution? Is this on top of sales tax? What about state taxes that vary from one state to the other? How do states collect tax revenues fairly for distribution to their budgets?

The main problem I have with this is that it lightens the load tremendously on those with high earnings because they can use that saved taxation to spend on other items. They could also conceivably find away around the consumption tax by purchasing out of the country and avoiding tax altogether.

But, for those who have low incomes and often rely on tax refunds each year, they are put in a serious bind. It is basically a way of saying, "If you are poor, you suck anyway, so good luck paying for stuff." People should not be punished because they earn a lower wage than others.

 

My biggest fear would be that the national sales tax wouldn't replace an income tax, it would merely supplement it. Sold on the notion that income taxes would go down, but with that never coming to pass.

 

Because many of those countries (in Europe) have their own consumption tax in the VAT. Besides, are you (or the mindless hordes of consumers in America) really going to give up the convenience of Wal-Mart. They have been show to hurt small businesses, drive companies to bankruptcy, and drive jobs overseas and still the American consumer flocks there. I think you are overestimating how many people have the means to leave the country to buy their goods in order to save the few dollars in tax.

 

Yeah, they probably will.

I believe you underestimate the amount of things the average consumer is willing to overlook in the name of saving money. The convenience of Wal-Mart stems directly from the fact that they offer low, low prices - or so that bouncing smiley face told me, and bouncing smiley faces don't lie - but what would happen if the prices were no longer low, low prices, but were instead inconveniently high prices?

 

For this, I like the idea of the VAT in Europe. The way I understand it, if you buy raw materials and turn them into something else, you are required to charge tax on your goods. For example, if you mine steel and sell it to a smelter, it is not taxed because you didn't change the ore, you just dug it up. If you smelt the ore and make steel, you charge tax for the value that was added to the ore.

As far as services, that is the sale of a resource and should be taxed. Just as in the existing sales tax, I would think that the seller would be responsible for charging and paying the tax, IMO.

Agreed. As I mentioned above, there would have to be some exemptions and all the things you mentioned would qualify, IMO. In addition, I would exempt every family an equal amount (prorated for size of family), like $5000 per adult and $1000 for each child every year.

In addition, once we get the debt paid off (I would set the tax percentage based on what we need to cover expenses plus a set amount to go to repay the debt), we could have sales tax holidays at back to school time or even more often, depending on how big the surpluses are. A surplus of a certain size could trigger an additional tax holiday at other times of the year.

I think we could deal with these instances somehow, but could you give me an example so that I can get a better handle on what you mean?

I would think that it would just go on top of the state taxes and the state would collect their points the same way they do now. State taxes already vary, so a flat sales tax over the top of that shouldn't change the existing enforcement mechanism.

Not really. Do you really think that the rich people are going to stop spending their money altogether? They have to live just like the rest of us, the difference is that they pay a lot more to live than the rest of us. I don't think they will cut back on their lifestyles just to save a few tax dollars. Besides, I think the loopholes they have now are much bigger than we will see with a consumption tax. Besides, I think it would be liberating for everyone to be able to decide exactly how much you want to pay in taxes every year.

Again, they would have the same kind of effect from sales tax holidays (eventually) and also the exemption at the beginning of the year. Every new year will bring a discount on everything they buy, just in time to take the edge off after the Christmas spending.

 

It won't feel that way when you are bringing home 20-40% more than you were the day before. Besides, once the various taxes are removed from the companies supplying the goods, the prices will fall, which will ease the burden of higher sales taxes.

Besides, many of the goods at Wal-Mart will be tax exempt (groceries and such), and the things that aren't you will just have to decide whether you really want it. If you want to save on the tax bill, go to a pawn shop or buy those used DVDs at Wherehouse Music. Used goods wouldn't be taxed, so Ebay would be another good place to save on the tax bill. If you want to avoid paying taxes, you will be able to, but the average American will not change their habits that much.

 

I would do it will the same law. The income tax is abolished in favor of the consumption tax. I would want the language of the bill to reflect that.