National Sales Tax????

[Bonnie]

A national sales tax
George Will

March 31, 2005


WASHINGTON -- The power to tax involves, as Chief Justice John Marshall said, the power to destroy. So does the power of tax reform, which is one reason why Rep. John Linder, a Georgia Republican, has a 133-page bill to replace 55,000 pages of tax rules.


His bill would abolish the IRS and the many billions of tax forms it sends out and receives. He would erase the federal income tax system -- personal and corporate income taxes, the regressive payroll tax and self-employment tax, capital gains, gift and estate taxes, the alternative minimum tax and the earned income tax credit -- and replace all that with a 23 percent national sales tax on personal consumption. That would not only sensitize consumers to the cost of government with every purchase, it would destroy K Street.

``K Street'' is shorthand for Washington's lawyer-lobbyist complex. It exists to continually complicate and defend the tax code, which is a cornucopia from which the political class pours benefits on constituencies. By replacing the income tax -- Linder had better repeal the 16th Amendment, to make sure the income tax stays gone -- everyone and all businesses would pay their taxes through economic choices, and K Street's intellectual capital, which consists of knowing how to game the tax code, would be radically depreciated.

Under his bill, he says, all goods, imported and domestic, would be treated equally at the checkout counter, and all taxpayers -- including upward of 50 million foreign visitors annually -- would pay ``as much as they choose, when they choose, by how they choose to spend.'' And his bill untaxes the poor by including an advanced monthly rebate, for every household, equal to the sales tax on consumption of essential goods and services, as calculated by the government, up to the annually adjusted poverty level.

Today the percentage of taxpayers who rely on professional tax preparers is at an all-time high. The 67 percent of tax filers who do not itemize may think they avoid compliance costs, which include nagging uncertainty about whether one has properly complied with a tax code about the meaning of which experts differ. But everyone pays the cost of the tax system's vast drag on the economy.

Linder says Americans spend 7 billion hours a year filling out IRS forms and at least that much calculating the tax implications of business decisions. Economic growth suffers because corporate boards waste huge amounts of time on such calculations rather than making economically rational allocations of resources. Money saved on compliance costs would fund job creation.

Corporations do not pay payroll and income taxes and compliance costs, they collect them from consumers through prices. So the 23 percent consumption tax would allow taxpayers to stop paying the huge embedded cost of corporate taxation. Linder says the director of the Congressional Budget Office told him it costs individuals and businesses about $500 billion to remit $2 trillion to Washington. And studies show that it costs the average small business $724 to collect and remit $100.

more
http://www.townhall.com/columnists/georgewill/printgw20050331.shtml

 

[5stringJeff]

23% sounds awfully high. How about 15% to start with?

 

[Bonnie]

23% sounds awfully high. How about 15% to start with?

I was thinking maybe even 10% this way you have a little wiggle room for adjustment which usually means up when talking taxes.

 

[Mr. P]

23% sounds awfully high. How about 15% to start with?

In the end it's less than we pay now.
http://www.fairtaxvolunteer.org/smart/index.html

 

[Bonnie]

In the end it's less than we pay now.
http://www.fairtaxvolunteer.org/smart/index.html

Interesting site. It makes sense the way they lay it out, Im just wondering what this will do if anything to stifle consumption of luxury or high end items?

 

[Annie]

A national sales tax
George Will





more
http://www.townhall.com/columnists/georgewill/printgw20050331.shtml

I would disagree. Sales tax is the most regressive tax there is. 100% of low income folks income is used to buy goods. In effect, you are giving everyone else tax-free savings. Inherently unfair.

 

[OCA]

Never, no sales tax unless current federal tax rates are dropped to the 10% range.

 

[Bonnie]

Never, no sales tax unless current federal tax rates are dropped to the 10% range.

I think the wisdom here is to drop all federal tax barring SS and state taxes in exchange for a sales tax. I really don't know if that would be feasible or not.

 

[Annie]

I think the wisdom here is to drop all federal tax barring SS and state taxes in exchange for a sales tax. I really don't know if that would be feasible or not.

I'm about to have a psychic break after the past 2 weeks.

I could go along with a flat tax, much lower rate.

 

[Bonnie]

I'm about to have a psychic break after the past 2 weeks.

I could go along with a flat tax, much lower rate.

I have heard economists say that a flat tax would be unfair to low income people as well citing that 10% of 20,000 is a good chunk compared with 10% of 100.000. A bit confusing to me, numbers not my passion.

 

[Annie]

I have heard economists say that a flat tax would be unfair to low income people as well citing that 10% of 20,000 is a good chunk compared with 10% of 100.000. A bit confusing to me, numbers not my passion.

Well let's put it this way, 10% of 30k is 3k. 10% of 300,000k is 30k. If my salary is 300, do you think all of it is spent? If my income is 30k, how much of it do you think is spent?

A sales tax would need to be higher, your example pointed that out. Flat tax, more likely at 10%. Sales tax at 23%, who is spending the greater percentage?

Flat taxes ARE regressive, in theory. In actuality the progressive income tax has too many loopholes for corporations and the more wealthy.

 

[5stringJeff]

Flat taxes ARE regressive, in theory. In actuality the progressive income tax has too many loopholes for corporations and the more wealthy.

No, in theory, flat taxes are neither regressive or progressive. Getting to a flat tax from our currently progressive system would be a "regressive" move, but the flat tax itself would not be. Regardless, every flat tax proposal I've ever seen exempts the first $10-$20K of income, making it a bit progressive, if anything.

 

[Annie]

No, in theory, flat taxes are neither regressive or progressive. Getting to a flat tax from our currently progressive system would be a "regressive" move, but the flat tax itself would not be. Regardless, every flat tax proposal I've ever seen exempts the first $10-$20K of income, making it a bit progressive, if anything.

The exemption would help in the progressive arena. By definition however, it would be a 'regressive' tax, theoretically. As I said, the 'progressive income tax' is no such thing:

http://explanation-guide.info/meaning/Tax.html

Progressive and regressive taxation
An important feature of tax systems is whether they are flat (the percentage does not depend on the base, hence the tax is proportional to how much you earn, have, or spend), regressive (the more you have the lower the tax rate), or progressive (the more you have the higher the tax rate). Progressive taxes reduce the tax burden of people with smaller incomes, since they take a smaller percentage of their income. This may be viewed as a good thing in itself, or it may be done for pragmatic reasons, since it requires less record-keeping and complexity by people with simpler affairs.

A flat tax makes sense, in lowering everyone's tax burden, IF the sales tax and other 'invisible' taxes were removed. Guess that means the states would have to move to the flat tax too.

 

[5stringJeff]

The exemption would help in the progressive arena. By definition however, it would be a 'regressive' tax, theoretically. As I said, the 'progressive income tax' is no such thing:

Again, based on your definition, a flat tax, in which everyone is taxed at the same rate, regardless of income, is not a regressive tax, in which lower income earners pay a higher rate.

 

[Annie]

Again, based on your definition, a flat tax, in which everyone is taxed at the same rate, regardless of income, is not a regressive tax, in which lower income earners pay a higher rate.

Jeff, In a 'progressive' tax, if properly applied, we'd each pay a % of income, with brackets made for income levels. So far, sounds like what was put into place. However, it's never been fair, I'll say that from being in situtation where family income was over 150k, (high bracket) and from where I am now, (earned income tax exemption given).

Exemptions for 'college savings', 401k, etc., do NOT apply to the working poor. I'm lucky, I own a home, save quite a lot there. Most do not qualify for that either.

Now a flat tax, strictly applied, says that my % now would be the same, whatever point I'm at. In actuality, for most of the 'working poor' they would probably come out the same, if the hidden taxes were eliminated, better off. The corporations and wealthier would probably also pay less, since luxury taxes would be eliminated-

Problem with our government, they always want MORE taxes from everyone, especially the rich-yet also cave into special interests, thus the complications of the system. That is one of the reasons I would like a flat tax.

 

[Mr. P]

I think the wisdom here is to drop all federal tax barring SS and state taxes in exchange for a sales tax. I really don't know if that would be feasible or not.

It is..this has been studied for many years, It will work an best of all it's "FAIR". Something the flat tax is not.

In addition..think of all the people that operate on a cash only basis now..they would now pay tax, just like everyone else.

 

[5stringJeff]

Jeff, In a 'progressive' tax, if properly applied, we'd each pay a % of income, with brackets made for income levels. So far, sounds like what was put into place. However, it's never been fair, I'll say that from being in situtation where family income was over 150k, (high bracket) and from where I am now, (earned income tax exemption given).

Exemptions for 'college savings', 401k, etc., do NOT apply to the working poor. I'm lucky, I own a home, save quite a lot there. Most do not qualify for that either.

Now a flat tax, strictly applied, says that my % now would be the same, whatever point I'm at. In actuality, for most of the 'working poor' they would probably come out the same, if the hidden taxes were eliminated, better off. The corporations and wealthier would probably also pay less, since luxury taxes would be eliminated-

Problem with our government, they always want MORE taxes from everyone, especially the rich-yet also cave into special interests, thus the complications of the system. That is one of the reasons I would like a flat tax.

The wealthier would pay less than they do now, but the end result would be a flat (i.e. neither progressive nor regressive) tax. I think we are saying the same thing, in different terms.

 

[Annie]

The wealthier would pay less than they do now, but the end result would be a flat (i.e. neither progressive nor regressive) tax. I think we are saying the same thing, in different terms.

Probably, I forget where we were...I think we should ALL pay less taxes, the government should spend less...

 

[5stringJeff]

Probably, I forget where we were...I think we should ALL pay less taxes, the government should spend less...

Woo-hoo!

 

[Bonnie]

Probably, I forget where we were...I think we should ALL pay less taxes, the government should spend less...

Amen to that!!