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US National Sales Tax...

S

soulcougher73

Lifer
What do you guys think of this? I think the government would just increase its spending with the added revenue. I would rather see them cut spending first before something like this.

Also. What do you guys think of the idea of eleminating the income tax but adding a National Sales Tax instead? It would collect money from the supposed 47% who dont pay any taxes at all. Id have to read more about that, but it sounds like a decent idea.

http://news.yahoo.com/s/yblog_exclu...ational-sales-tax-help-bring-down-the-deficit

Could a [COLOR=#366388 !important][COLOR=#366388 !important]national [COLOR=#366388 !important]sales [/COLOR][COLOR=#366388 !important]tax[/COLOR][/COLOR][/COLOR] help fix the deficit and gain enough political support to break the stalemate in the nation's capital? Yahoo! reader Brad Sylvester believes it could.
Following a contentious midterm election, some 81 percent of respondents to a recent ABC News/Yahoo! News poll said they expect partisan warfare and inaction to continue over the next two years.
[ For complete coverage of politics and policy, go to Yahoo! Politics ]


There are plenty of ideas on how to return the government to fiscal responsibility. That debate is happening across the country, but officials in Washington are making painfully slow progress on the thorniest issues. There is little agreement within the two parties, never mind between them. To spur debate and move the conversation forward, Yahoo! News asked the American public, through our Yahoo! Contributor Network, to submit fresh ideas. We've chosen some of the most interesting ideas to highlight over the course of this week. We also asked key lawmakers to weigh in on those ideas. And as we go along, we'd like you, our readers, to tell us what you think.
Many Republicans refuse to consider any [COLOR=#366388 !important][COLOR=#366388 !important]tax [COLOR=#366388 !important]hikes[/COLOR][/COLOR][/COLOR] at all. And many liberal Democrats — who, ironically, may have even more power in the party now that many of their more moderate colleagues have lost their seats — can't stomach the thought of cutting back government services or programs. The only certainty is that today's path is unsustainable. In fiscal 2010 (which ended on September 30th) Uncle Sam spent $1.3 trillion more than he took in. All told, the nation's outstanding debt stands at nearly $14 trillion. Everyone knows we can't spend far more than we take in forever. Eventually, the bill will come due. Sylvester's solution: A five percent national sales tax that would apply to retail and wholesale sales across the board. "Many states already institute a retail sales tax, and they continue to have healthy economies; the notion that a national sales tax would cripple the economy is false," he argues. "Skyrocketing debt is by far the greater of the two evils." (Read his argument here.)
Could a national sales tax help fix the deficit and gain political support?
Politically that will be a tough sell. Yahoo! News spoke with Rep. Paul Ryan (R-Wis.), the incoming head of the House Budget Committee. A top aide to the new Speaker of the House, Rep. John Boehner, Ryan will be a key player in crafting the budget and negotiating spending and [COLOR=#366388 !important][COLOR=#366388 !important]tax [COLOR=#366388 !important]decisions[/COLOR][/COLOR][/COLOR] when Republicans take control of the House in January — and he's not convinced such a tax is needed. "I do not like the idea, because it skirts the real problem, which is spending," says Ryan. "I am not interested in chasing ever higher spending with ever higher revenue." (Read a discussion with Ryan on the proposal here.)
The idea doesn't seem any more popular on the Democratic side. Yahoo! News also asked Sen. Mark Warner, (D-Va.), a prominent centrist who is well-placed to help forge compromise on economic issues in the new Congress to weigh in. His view: "I have not seen a lot of appetite for that [idea] in this country." (Read a discussion with Warner on the proposal here.)
Why the skepticism? There's little doubt such a tax could raise lots of money. Mr. Sylvester argues it could raise billions from retail sales alone. And it's not just many American states that have sales taxes. As Sen. Warner points out, many other developed countries in Europe and elsewhere have them too. The most common form is known as a [COLOR=#366388 !important][COLOR=#366388 !important]Value [COLOR=#366388 !important]Added [/COLOR][COLOR=#366388 !important]Tax[/COLOR][/COLOR][/COLOR], in which new tax revenues are collected on the extra "value added" that each person or company creates each step of the way as a product or service is transformed from raw material to finished product.
Nor is Mr. Sylvester alone in backing the notion. The idea has been kicking around Washington for years, though debate over it picked up steam in the fall of 2009, as Democrats quietly began discussing how to tackle the looming deficit. The most prominent trial balloon backing a sales tax came from John Podesta, a former chief of staff to Bill Clinton and an influential Obama adviser who now runs a liberal think tank called the Center for American Progress. Roger Altman, a former top Treasury official who is now a leading candidate to replace Larry Summers as the president's top economic adviser, also urged the administration to consider a value-added tax at a conference sponsored by the CAP. (Read coverage of their proposal here.)
More recently, Alice Rivlin, the former head of the Congressional Budget Office, and Pete Domenici, the former governor of New Mexico, have also argued for a VAT in one of several reports released in the fall on how to bring down the deficit. (Read more about their report here.)
Like Podesta and Rivlin, many economists think that adding a national sales tax in the form of a VAT would be a better, more efficient way for the government to raise needed revenues than boosting taxes on capital or investment income. While individual shoppers might not like it, economists generally believe that making it cheaper to invest (through lower taxes) and more expensive to consume (through higher taxes) is the best way to encourage economic growth and create jobs over the long term. And no one wants to propose increasing taxes on income; that's too politically unpalatable, as we've just seen in the debate over renewing the [COLOR=#366388 !important][COLOR=#366388 !important]Bush [COLOR=#366388 !important]tax [/COLOR][COLOR=#366388 !important]cuts[/COLOR][/COLOR][/COLOR].
Yet if support for a national sales tax has grown in some circles, in others opposition remains implacable. Conservative economists tend to dislike the idea because they think a sales tax will raise costs in the economy overall and thereby stifle growth. They also think it's an easy, almost hidden way for government to raise revenues; they'd rather taxes were more visible, so as to keep the pressure on Uncle Sam to hold them down. Meanwhile, many liberals dislike the idea of boosting [COLOR=#366388 !important][COLOR=#366388 !important]sales [COLOR=#366388 !important]taxes[/COLOR][/COLOR][/COLOR], because they believe the burden would fall heaviest on people with low incomes, since they spend a far higher portion of their income on consumption than do those in higher brackets.
Whatever the economic arguments, however, politicians of all stripes currently see a national sales tax as a political non-starter. Americans tend to hate sales taxes in general; even small increases in sales taxes to pay for worthy things like education have been shot down by local communities when they've been put up for a vote. Given how much anti-tax sentiment already exists across the country, and how heated the arguments have been about raising income taxes even for the wealthy, few politicians appear willing to risk the potential wrath they'd face if they suggested hiking sales taxes across the board as well.
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That 47% happen to still pay social security/medicare taxes on their income (assuming they have income). Of course, people here will ignore that fact.

That sales tax has many, many problems. These problems are not insurmountable. But, in the end, we probably won't like the result after such a large patchwork of problems being crudely "fixed".

I'll start by assuming that we will go big on the sales tax if we implemented it. Going small brings in little revenue and just adds burdens to businesses and more government overhead to monitor yet another tax. I'll also assume the costs are directly on the consumer with another line on the sales ticket or are passed on to the consumer with higher prices.

1) As you stated, that is just one more revenue source for the government. Revenue sources rarely go away. This is a permanant tax that you would be getting.

2) The sales tax rate would be extremely high. Far higher than most people think. The federal government spends roughly $3.5 trillion a year (2009 data). US consumers spend roughly $10.4 trillion a year. Thus, if we switch entirely to sales tax (no more income, FICA, corporate, etc taxes), we'll have to have a 33.7% sales tax rate. Plus whatever rate you have on your state and local sales taxes.

3) Sales taxes are extremely recessive. Poor people spend everything they have. Thus, the tax rate on the poorest would be 33.7%. Wealthy people spend little of what they have. Thus a rich person like Warren Buffet may make $1 billion a year but spend $100,000. His tax would be $33,700, for a net rate of 0.00337%. And that is if he spent it all in the US. He is wealthy enough that he could spend less in the US and more in foreign countries, reducing his US tax rate even further.

4) That recessive tax rate can be partially fixed by "giving" all poor people money to offset their sales tax. Suppose the poor had an example income of $10,000, then the tax is $3,370. To balance out their high tax rate, we can give everyone $3370. That would add one more trillion dollars to the governmental yearly spending. Now the government spends $4.5 trillion a year, meaning the tax rate must be 43.3%. The poor were taxed $4330 comparied to their gift of $3370. Even with such sizable free money, the poor still pay a lot of taxes.

5) Think of the damage to large purchases. Suddenly your next house purchase is taxed at 43.3%. To buy a median house at $170,500, you have to first pay $73,826 in taxes! Who here can pay that up front? Not many. Suddenly either the prices of the houses must tank (worsening the bad recession we just had), or mortgages will skyrocket (meaning people don't have money to buy things which worsens the recession). Same goes with buying cars, Detroit would be ruined as would much of our economy.

6) Of course, we can exempt house purchases to avoid that problem. But, then the sales tax rate must increase to 53.1%. Exempt cars too and that sales tax rate becomes 55.3%. But now, the poor people are hurt even more, we better up their "gift" to $6000 to offset it all, but that leads to more government revenue needed, and the sales tax rate is finally 65.2%.

7) What about those retirement plans that people have? Well, if you have an Roth IRA, you paid income taxes up front with the promise to never pay any more taxes. Oops, now that is taxed at 65.2%. So much for retirement.

8) What about unemployment for the poor? Why would they work near full time at minimum wage for $10,000 (taxed at 65.2%) when there is a free check of $6000 per person coming along? How great is the deal now to become a welfare baby factory! Talk about not fixing welfare problems.

9) What would a 65.2% (plus state + local tax) rate do to black markets? It would be damn lucrative to slip cash under the table instead of paying that 65.2%. Plus, who is the double checker on your tax? With income tax both you and your employer report the income. It has a built in double-check mechanism. What is to stop me from selling you something for cash under the table and me simply not reporting it?

I could go on and on. Instead, I say tax wealth. We can tax money coming in (income and FICA), we could tax money going out (sales), or we could tax money that is stagnant (wealth taxes such as property tax or tax on stock market accounts, etc.) Taxing wealth means people who can afford to pay tax will pay tax. Taxing wealth means that people are encouraged to spend (fix the recession). Taxing wealth means we can end so many welfare giveaways. Taxing wealth means we no longer have Warren Buffet paying a lower tax rate than his secretaries. Taxing wealth means that people living in a high cost of living area are no longer screwed by being called "rich" for having a slightly higher income.
 
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I'm against it being on services, medicine, food, and shelter. They ought to just cut spending to the point where the government can be sufficiently funded on non-protectionist tariffs alone.
 
soulcougher73 said:
What do you guys think of this? I think the government would just increase its spending with the added revenue. I would rather see them cut spending first before something like this.

Also. What do you guys think of the idea of eleminating the income tax but adding a National Sales Tax instead? It would collect money from the supposed 47% who dont pay any taxes at all. Id have to read more about that, but it sounds like a decent idea.

http://news.yahoo.com/s/yblog_exclu...ational-sales-tax-help-bring-down-the-deficit
Click to expand...

I would support implementing a sales tax on non-essential goods providing the income tax were abolished. I much rather have a consumption tax than an income tax. I would also support some credit system that the taxes would only start past a certain amount of money that someone spent per year. Food, clothing, medicine, shelter, etc would be exempt from the tax. no VAT either, just simple retail.

The % of tax must be low as well, no more than 5-10%.
 
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wow, this has never been discussed here before. not once at all. nope. i award you for your originality!
 
ElFenix said:
wow, this has never been discussed here before. not once at all. nope. i award you for your originality!
Click to expand...

Ive been reading this forum for along time. I hardly ever see talk about a US VAT tax or even the 2nd question i raised in my OP. Not to say VAT hasnt been talked about, but its not a common thing when talking about the US.

I suppose i could make another Palin post even though i cant stand her. Would that be more original?
 
tax and spend needs to be replaced with cap taxes/freeze spending. Otherwise the assault and attack on the tax payer will continue.
 
If they lower or eliminate income taxes accordingly I'd support it. It would help the poor and lower income pay their fair share since they pay no income taxes. As it stands today 3/4 of americans pay less than SS/Medicare (7&#37😉. That needs to stop.

However I could see the double edge sword since our economy is based on consumer spending, if times get tough that spending would reduce tax revenues exponentially quicker than the result in income tax reduction via unemployment.

But as you can see from socialist European countries, the VAT is just used for more and expansive entitlement spending and not deficit reduction.
 
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spidey07 said:
If they lower or eliminate income taxes accordingly I'd support it. It would help the poor and lower income pay their fair share since they pay no income taxes. As it stands today 3/4 of americans pay less than SS/Medicare (7%). That needs to stop.

However I could see the double edge sword since our economy is based on consumer spending, if times get tough that spending would reduce tax revenues exponentially quicker than the result in income tax reduction via unemployment.

But as you can see from socialist European countries, the VAT is just used for more and expansive entitlement spending and not deficit reduction.
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AMSR.



Good Grief!
 
Removing income tax in lieu of sales tax would never work. The poor would then be basically taxed at the exact same rate (of expenditures, not income) as everyone else and, as much as I hate welfare, that would not work.

Some kind of hybrid system maybe, but meh...
 
Inherently regressive tax, you'll essentially blow up the income gap.

If i were you, I wouldn't worry about the people too poor to pay tax and focus on too rich to pay tax (good tax attorney can do wonder for your effective rate). Progressive taxation follows the declining marginal utility of money.
 
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The government needs to prove that they can reduce spending before they can be allowed to add more taxes.

That said, if they remove income tax and move to a consumption-based tax on non-essential goods that is reasonable, I would support it. But, again, the government needs to reduce spending much more than the token amounts being thrown around before any new taxes should be discussed.
 
spidey07 said:
If they lower or eliminate income taxes accordingly I'd support it. It would help the poor and lower income pay their fair share since they pay no income taxes. As it stands today 3/4 of americans pay less than SS/Medicare (7%). That needs to stop.

However I could see the double edge sword since our economy is based on consumer spending, if times get tough that spending would reduce tax revenues exponentially quicker than the result in income tax reduction via unemployment.

But as you can see from socialist European countries, the VAT is just used for more and expansive entitlement spending and not deficit reduction.
Click to expand...

They'd do that short term, then long term, they'd just jack the income tax back up and we'd then really get socked. I am against a National Sales tax 100% unless they make a constitutional amendment that specifies what the tax rates will be permanently and they are not subject to the whim of a future congress.
 
As mentioned in another thread, the logic that government increases spending in relation to revenue like that is reverse 'starve the beast'. It is widely discredited.

A national sales tax is a terrible idea.
 
halik said:
Inherently regressive tax, you'll essentially blow up the income gap. If i were you, I wouldn't worry about the people too poor to pay tax and focus on too rich to pay tax (good tax attorney can do wonder for your effective rate).
Click to expand...

That is why non-essential goods would be exempt. In CA, you pay no tax on non-prepared food or services. Thus, those who are truely poor and cannot afford luxury items still pay no taxes. However, those poor who blow their welfare checks on 22" rims for their Escalades will have to give some back.

There is no regression if non-essential goods are exempt.
 
matt0611 said:
I would support implementing a sales tax on non-essential goods providing the income tax were abolished. I much rather have a consumption tax than an income tax. I would also support some credit system that the taxes would only start past a certain amount of money that someone spent per year. Food, clothing, medicine, shelter, etc would be exempt from the tax. no VAT either, just simple retail.

The % of tax must be low as well, no more than 5-10%.
Click to expand...
Too bad the tax would be 10 times higher than that.
 
drebo said:
That is why non-essential goods would be exempt. In CA, you pay no tax on non-prepared food or services. Thus, those who are truely poor and cannot afford luxury items still pay no taxes. However, those poor who blow their welfare checks on 22" rims for their Escalades will have to give some back.

There is no regression if non-essential goods are exempt.
Click to expand...

It would still be regressive. If I buy and ipod and pay $5 consumption tax and a guy making 15K a year buys the same ipod, his effective tax rate is MUCH higher than mine.

This is the same reason why Switzerland bases traffic fines relative to your income - $100 ticket doesn't exactly deter Ferrari speeders, but makes a huge impact on the guy driving a '89 CRX.

You're essentially putting a disincentive to consume predominantly on the lower income stratum.
 
Dullard has some good points. The black market would be ridiculous...I'd go as far as to say organized crime would become a super power.

What's more likely to happen is a 5% national sales tax will be enacted, three quarters of its revenue being spent on an over-complicated system to administer it followed by the government increasing spending twice as much as the amount of new revenue brought in.
 
matt0611 said:
I would support implementing a sales tax on non-essential goods providing the income tax were abolished. I much rather have a consumption tax than an income tax. I would also support some credit system that the taxes would only start past a certain amount of money that someone spent per year. Food, clothing, medicine, shelter, etc would be exempt from the tax. no VAT either, just simple retail.

The % of tax must be low as well, no more than 5-10%.
Click to expand...

The actual percentage required to make up for other taxation would be somewhere in the neighborhood of 34%. This also assumes no tax evasion, which would be rampant.

http://www.factcheck.org/taxes/unspinning_the_fairtax.html
 
drebo said:
The government needs to prove that they can reduce spending before they can be allowed to add more taxes.

That said, if they remove income tax and move to a consumption-based tax on non-essential goods that is reasonable, I would support it. But, again, the government needs to reduce spending much more than the token amounts being thrown around before any new taxes should be discussed.
Click to expand...

What would you have the government reduce spending on?
 
drebo said:
That is why non-essential goods would be exempt. In CA, you pay no tax on non-prepared food or services. Thus, those who are truely poor and cannot afford luxury items still pay no taxes. However, those poor who blow their welfare checks on 22" rims for their Escalades will have to give some back.

There is no regression if non-essential goods are exempt.
Click to expand...
Politics comes into play when determiing non-essential goods.

Cheese dip vs cheese slices
Salsa vs tomatoes
avacodoes

Parkas (New England - branded Patriots) vs (Miami - branded Dolphins)
as another stated, housing, transportation.

Face lift for Hollywood vs Jane Doe

Once you start to pick & choose, you can easily end up with the same mess we already have.

And the mess it would make for retailers that have to accomindate both items
 
Common Courtesy said:
Politics comes into play when determiing non-essential goods.

Cheese dip vs cheese slices
Salsa vs tomatoes
avacodoes

Parkas (New England - branded Patriots) vs (Miami - branded Dolphins)
as another stated, housing, transportation.

Face lift for Hollywood vs Jane Doe

Once you start to pick & choose, you can easily end up with the same mess we already have.

And the mess it would make for retailers that have to accomindate both items
Click to expand...

This x million. Who will bet me that the companies that spend more money lobbying will have more products classified as "essential"? Anyone?
 
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