Reply With QuoteShouldn't we tax consumption instead of income? No income tax, but federal sales taxes. The more you consume resources and everything else, the more you would pay.
BTW, once you reach self sufficient middle class, you actually get penalized for having a kid.
Certain breaks and deductions have a limiting factor depending on the number of dependants. Outdated "averages" for the wages of women and the cost of raising a kid have made the tax rates for a middle class family of, say, 4 jump dramatically NOT because of the rates themselves, but because anybody earning more than, say, $160,000 a year (that is a family) is no longer elegable for anything, including, ironically, things like self funded retirement plans (ROTH IRA).
Many have no pity for this genre because they feel that that salary should be enough, but it truly is not, and increases the barrier between the classes even further as an invisible glass ceiling is formed that makes your next rais from your boss (after a masters degree and 20 years experience) turn to much less in the long run than you ever imagined.
The rich have paid off their "representatives" to make their life more secure, the poor are being takein advantage of in other ways, but their taxes have been the main issue that have gotten people elected as well. The middle class has just been too thinly spread to be able to come together on any of these issues and, as a result, is being squashed. A lucky few have shot out on the "good side", but many are either bearing the nations burden or are being slowly pushed further away from the "American Dream" that so many Republicans as their fallacious battle cry in the past few elections.
The tax code needs to be broken down and re-assembled, or it will be one of the mechanisms that eventually break us.
Shouldn't we tax consumption instead of income? No income tax, but federal sales taxes. The more you consume resources and everything else, the more you would pay.
Sounds good, but that stifled purchasing.
The amount they would need to tax would make consumption rates drop significantly (as well as trade/reuse and recycle going way up).
While that may work for some scenarios, that amount of reduction reduces development and progression....
Not that we all NEED SUVs and LCD TVs, but still.....
^conjecture. perhaps not. some people believe it would create an economic boom. so everything you said is debatable. except you are right that most of the crap we buy makes no sense, and in fact this insane consumption is destroying the only planet we have. unless we're going to terraform Mars real soon, and start the whole destructive process over again, less consumption is what we need.
http://www.fairtax.org/site/PageServer
^
I keep hearing about this, and I keep thinking the same thing:
1) giant black markets will develop to evade it. If you can find a way to bleed merchandise around the tax wall, you would be able to make a lot of money. It would be a field day for the mob, especially.
2) If you make a lot of money, and you're getting hit with high taxes here, just spend your money somewhere else. For example, if I ship some money down to Costa Rica, build a house there, and run my business in the US via internet, I don't think I'm paying much in the way of taxes under this plan.
because income tax evasion is no problem
giant black markets will develop to evade it.
^
The question is what would be more evadable by a larger number of people. I would guess it would be a sales tax. Complain as they might about the income tax, it's very hard for the vast majority to get around it in a meaningful way. If you work for someone else, you never actually see the tax money. It gets taken out before you can get to it.
I would guess not. With the labyrinthine system of deductions and exemptions I'm not going to take your word for that. It's actually hard to avoid paying sales tax, and I honestly don't see a "huge black market" being set up for every little thing. What, is everyone going to start keeping money in mattresses again and ditch their atm and credit cards? I don't think so. When they started taxing cigarettes more in New York, sure a few people began standing on 125th to sell 5 dollar packs, but the VAST VAST majority of NY smokers are still going into Duane Reade or some newsstand and ponying up the taxed amount. If you think stores are going to open up in alleyways selling black market SUVs and off-the-radar TV sets for cash I have a hard time imagining how that would work. Psstt...I have a duffel bag full of TV's at 50 bucks less than the store...meet me around the corner and I'll drop one in your hand...yeah right.I would guess it would be a sales tax.
MTG, I can see what he is saying, but I do not think he is phrasingit right.
The only issue is how much tax would be placed on sales to make it so a profit COULD be made from evading it?
Prohibition is one thnig. It made a $1 bottle of hooch go for $10 (don't quote me on those numbers). It was an easy profit worth the risk.
But if national sales tax is placed on all products coming INTO the country or sold in the country, it would depend on what that would be.
5%? Not worth risking arrest on anything large enough to gain a profit off the base price and still be lower than the original tax.
20%? Maybe, but we are still talking marginal. There are "sales" that offer more than that.
I think the only way that the "cash only" black market would ever go full swing would be if there was a LARGE tax, 40%/50%, on items. Anything less would just not be worth the risk/operating cost.
As for the first point, the economic boom, I think that would be a short boom. A whip crack, if you will. People will like the additional cash on hand, but if the price of their merchandise goes up by 30% you will see the same kind of reaction we had with cars and gas prices.
The percentage raise in gas was significant, but when you look at the overall increase in expenses, the % was relatively small. But people started selling their SUV's and pushing for more efficient vehicles. The hybrids that were only dinky little meow-meow cars (Prius) became SUV Hybrids.
The government would not be nimble enough to mold tax rates to what was sustainable and produced the revenue needed to maintain our services. The only other drawback would be that, besides food, there is no thing that we really REALLY need to buy at a constant rate. Our yearly tax revenue would not be a dependable predictable amount.
While the recession has shown that income can also fluctuate, when it does, that is not necessarily the worst of our worries. But consumer spending? Place your bets on that one.
Income and spending are directly linked to each other.
---
Economists have weighed in on both sides with differing opinions. I'm no economist but my opinion is that I would prefer a sales tax to an income tax. IMO it's beneficial in several ways to tax consumption instead of income.
The cigarette this is more informative than you may think, and not in the way you present it. For decades, even before the big cig tax increases of the last decade, one of the mob's most dependably lucrative business has been bootlegging cigarettes. They buy them by the tractor trailer load down south where there are very low state cig taxes, haul them up here, counterfeit the tax stamps, and sell them to stores. So just because the end customer is buying them over the counter, don't assume that the state actually collected the tax on those cigs.
Also, the tax rate planned for the Fairtax proposal is 23% IIRC. That's a lot of margin for a black marketeer to work with.
Originally Posted by MidtownGuy
They could just get rid of the deductions. But that might not be so politically palatable. Think about trying to get rid of the mortage interest and property tax deductions.
One other thing:
The top 1% now pay 38% of the personal income tax. If we went to a consumption tax, do the top 1% spend enough of their income (as opposed to reinvesting it) to maintain that. What % of income do people spend at varioius income levels? I can't see how a consumption tax isn't more regressive than the income tax, if that's what you care about.
BBMW, the top 1% earn more than 38% of the money.
Careful how you play the #s.
You may be right in saying that they may not be as inclined to spend as much as they are currently taxed, but that is hard to say without some solid #s.....
There are pros and cons for both tax systems (BTW, the US had used a consumption tax for revenue for most of its existence. A century ago more than half the revenue collected was from Port of NY taxes. Customs House was one of the most important buildings in federal government). But neither is a no-brainer. There are negative impacts if not properly anticipated.
Maybe not a good idea to mess with real estate. It basically fuels the industrial world. Look what we are going through now.
This is true, and one of the basic problems with a consumption tax.
Posting Permissions
Bookmarks