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

Andy:

Here's where you're wrong about consumption taxes. While it's true that the wealthy have more expensive lifestyles, and therefore will pay more in absolute dollars than the less wealthy, they spend proportionately less of their incomes on items that would be subject to the tax. As a percentage of their incomes, they will pay substantially less than a lower earner.

If I earn and spend $50K a year, i'll pay tax on that $50K.

If my earnings increase to $150K, i may increase my lifestyle, but likely not to anywhere near $150K. Suppose i now spend $80K. I'm not being taxed on $70 K of my raise.

The tax that would have been captured by an income tax system on my unspent $70K of earnings, will instead be borne by those in the earn 50, spend 50 demographic. The less wealthy who cannot choose to save a big percentage of their incomes make up the shortfall that would have been collected from the high-earners.

Some people are ok with that. Conceptually it may be more 'fair.' Possibly high earners are currently overpaying based on the services they receive.

Consumption taxes likely better reflect the 'use' of government services. But if the total dollars needed to run the government is constant -- then the tax on 'unspent' earnings has to be made up somewhere. Just be very clear that a consumption tax does shift the burden from the higher earners, to the lower earners.

The other glitches discussed in this thread can be worked out. They have been addressed in Europe, Canada, and other countries with a national sales tax. Working them out means the infrastructure, regulations, interpretations, etc -- which are the crux of the loopholes and exemptions that frustrate you with the income tax -- are introduced. So much of the savings of a simplified system, gets redirected. And the simplification gets complicated.

Perhaps a simplification and streamlining of the current income tax structure would be more effective. Fewer exemptions? Do away with itemized deductions?

I prefer a progressive income tax system. It taxes those who can most afford to pay.

 

I think it would take a Constitutional Amendment banning the income tax to get me to feel comfortable that it wouldn't be re-adopted later.

But I have a lot of trust issues when it comes to the government.

 

Yeah, it would probably take an amendment, but then so would my ideal election system.

Dream big if you are going to dream.

 

In addition to the reason bnb gave, such a sales tax will never be adopted here in lieu of the income tax b/c 70% of the national GDP is derived from consumption/consumer spending. The economy would come to a standstill and tax revenues would dwindle as consumers reigned in their spending.

Right now 90+ percent of the national tax revenue comes from individual taxpayers, with the small remaining percentage paid by corporations. Congress knows who they work for.

The tax code is also a complex maze of endless deadends and 5hrs completion time per schedule all by design. KPMG, H&R Block, E&Y, etc all lobby hard every year to make sure the average joe won't be able to figure his taxes on his own.

 

The internet......


I fear American made products would take a huge hit in all sectors that are not especially 'specialized'. If shipping and convenience are less than the proposed 23% tax here (which in most cases it would be) I think people would buy foreign often. I understand what you are saying about convenience, but I don't think that it’s enough of a deterrent and is not worth the risk of the reform.

 

Consumption tax as a primary tax is regressive. The poor and middle class spend a larger percentage of their income than the rich. Poor people and the middle class have to spend all their income to make ends meet. They often spend more than their income by borrowing, so in this scenario, they actually have to pay taxes on more money than they make.

Rich people spend less of their income as a percentage so their tax rate would even be less than poor people. This idea does not fly.