Blasphemy: a National Sales Tax would be MUCH better than our present or any Income Tax system

Our present system only makes wealth disparity worse.

great rewards to generate political support

and it didn't become law until 1965.

The “Fair Tax” is a nonstarter just from its description: a 22 percent national sales tax on all new articles.

This means a $500 new canoe is liable for a 22-percent tax bite, and a $5 million pre-owned yacht is tax free.

It eliminates a lot of embedded tax. Also it has a low income rebate on taxes.

I not for or against it. But it does have some merits worth looking at.

We need those embedded tax revenues to run the government. There is nothing positive about a system that destroys the government, destroys the American economy and dumps the entire tax burden on the working class in one bill.

They calculated it differently than sales tax is normally done, to deceive people into thinking it's a lower rate than it is. However, they do tell the truth in their FAQ:

https://fairtax.org/faq

the problems you list have to do with insufficient enforcement and corruption of the idea and goals of a progressive income tax to the benefit of the rich. rich people and their lobbyists and republican politicians have flattened the progressivity of the rates, figured out ways to have rich people income (like income from capital) be taxed at lower rates than ordinary people income (income from labor) and even let rich people disguise income from labor as income from capital (incentive stock options, e.g.) to get away with contributing even less.

the solution to that is not to ignore the corrupting actions of the rich and greedy and replace the structure of the tax system with something that on its face further benefits the rich at the expense of the poor and then to try to convince people that it will work because it somehow magically won't then be corrupted by the same forces you're conceding to now.


if the rich can corrupt the income tax system to favor them at the expense of the poor, they'll even more readily corrupt a sales tax system to benefit themselves at the expense of the poor.

so give me a break, i'm not buying for one minute that a sales tax would be a boon for the poor. as soon as or prior to a national sales tax is passed, the rich will get to work and eventually the things rich people buy will face a lower or zero sales tax (after all, executives need personal helicopters to create jobs) and poor people will have to pay taxes on more and more (food is exempt? oh, but that food has a tiny amount of sugar in it or was imported or whatever so it's not exempt).


income tax is not inherently problematic in terms of enforcement. the problem is we've let it evolve into a system where people can disguise or evade it more and more, at least if you're rich or a business. the solution to that is not to change what you tax, the solution is more and better enforcement and to change the rules so that it's harder to evade.

start by taxing all income the same whether it's from labor or capital. restore progressivity to the rates. hire many more irs auditors. require deductions to have much better documentation, e.g., it's not an expense unless it appears as income on someone else's taxes. that would make it much more enforceable, kinda like a value added tax except for income.

affluent.

Here in CT we started taxing food. BUT it depends on what food. That chicken that you buy already roasted is the same chicken you bought raw, took home and cooked yourself. You pay a tax on the fact that food isn't always just the same and what you are buying has extra costs involved if you buy it cooked. I get this distinction but some CT republicans are yelling "Food tax!" at Governor Lamont, our Dem governor whose budget included it.

Milk is not taxed. Soda is. A loaf of bread, a lb. of sugar, and other ingredients in baked goods are not taxed. Etc. https://www.wfsb.com/news/tax-on-many-food-items-will-increase-on-oct/article_4b3e2584-d593-11e9-8643-77f218d3edc8.html

Fast food of course taxed. Alcohol including wine and beer and taxed.

As long as I buy ice cream in 1 pint or more containers, no tax.

If I buy premade sandwiches, they are taxed, but not if I buy sandwich meat and bread separately.

For my husband and me, the tax is less onerous.

The beat goes on...

Namely, the homeless. They have to buy prepared foods. Think about it.

Commission. He is aware of this impact on the homeless but the commission has numerous more pressing business to deal with. This will, however, come before his commission to be dealt with when it comes into effect. They are constantly dealing with overflow of the city's shelters and the delivery of health care services on people disproportionately affected by drug addiction and alcoholism. Homelessness is a multi-faceted problem, indeed...

but you are absolutely right. Homeless people by definition cannot cook and must rely on pre-made and pre-cooked food items. This is terribly regressive on them.

that's an argument for fixing the tax code to make it simpler and less expensive and difficult to enforce.

it's not an argument for scrapping it and replacing it with something more regressive that sooner enough will become something the rich can evade just as readily.

What we need is a fair, graduated income tax.

...until we actually did it. Then the rules and loopholes would grow like kudzu.

Not dissimilar to the cheating that happened with student test scores when it happened that people's careers were now riding on the results. All of a sudden there was all this cheating. Whoda thunk it?

and the rules are far less than under an income tax system.

simplify the income tax code and it becomes much more enforceable.

give the rich and their lobbyists a bit of time in an sale-tax-only environment and the sale tax code will be riddled with exceptions and exemptions favoring the rich.

oh hey, goods generated or sold in this particular zone in my district shouldn't face the sales tax on every other thursday. what? i get big campaign contributions from someone who owns a business in that district? gee, i had no idea!


oh, and what, does the sale of financial and real investments become tax-free?

As I said in my OP, income is VERY complicated to compute and that much more complicated to audit.

and automation can make it much more verifiable than it currently is.

eventually it should be easy to make sure that expenses for one show up as income for someone else.


moreover, your argument boils down to, hey, the rich are good at evading taxes, so let's tax to the poor.
ohh, we'll carve out a few exceptions so that we can pretend it's a fair system.


sorry, no, let's fight harder to tax the rich properly.

What do you know, for example, about depreciation, amortization, patent, trademark, deferred income, research and development, etc. income/expense recognition rules? There have always been and always will be arcane and complicated rules for their treatments, for good reason.

and as noted before, just because the rich are adept at making this complicated and challenging for tax officials isn't an excuse to give up on taxing their income entirely and going after other people.

the rich will benefit mightily from switching to a national sales tax no matter what foods are exempt.

say i make $1,000,000 per year and pay $150,000 in income taxes. that's a 15% effective tax rate, probably lower than most people earning $1,000,000 per year pay.

if i spend "only" $150,000 per year on goods and services (probably more than someone with that kind of income spends), what does the sales tax rate need to be before i pay more under a sales tax regime than an income tax regime?

if the national sales tax rate is a high 20%, that person would need to spend a whopping $750,000 per year to reach the same level as with the income tax.


meanwhile, poor people who are currently exempt from income tax are forced to pay quite a bit. oh, their food and clothing is maybe tax-free, but everything else they spend money on isn't. their zero income tax goes to non-zero, and every penny hurts them.

our byzantine and ever changing tax codes, and lobbyists from quicken et al have made sure that our tax processes remain a cash cow for the tax prep industry and a giant loophole for the fabulously wealthy.

Our entire government is a swamp of corruption. Ironic that the most corrupt president in living memory ran on 'draining' it.

you can be sure that loopholes will proliferate in record time.

You want to make it complicated, and prone to gaming and loopholes:

"1) Because different items for purchase can easily be taxed at different rates 2) some items don't have to be taxed at all 3) taxes can be instituted on items and transactions that are not currently taxed 4) government refunds of sales taxes can be easily instituted."

So we're looking at multiple rates, depending on definitions of products, exemptions, taxing more things than just a sales tax, and a system of refunds. If you want to know how these all lead to loopholes and fraud, Google "VAT fraud" and "vat loopholes".

But basic economics explains that income taxes are progressive (the more you have or earn the more you pay) while sales taxes are regressive (by treating everyone the same, the poorer you are the more tax you pay for necessities).

I believe that dropping the income tax would be disastrous for the working poor and very detrimental to the middle class.

Income taxes are not progressive if they're not universally applied across all incomes (our current situation).

the regressivity of a sales tax can vary depending on its implementation, but you cannot get anything close to the progressivity of an income tax system.

you're surrendering many progressive ideals in a vein hope that we'll be able to settle for a tiny amount of progressivity while permanently preventing us from ever achieving a reasonable amount of progressivity.

the walton family is laughing maniacally reading your posts. concentration of wealth will continue to advance under your suggestions.

there is just no way super-rich people will ever face enough sales tax to make a dent in the concentration of wealth problem.

Correct... to the point of not being regressive at all, and to the point of being far superior to an income tax system that is, itself, regressive by legislation and enforcement.

the progressivity of a sales tax is inherently limited because the rich simply do not spend anything close to the proportion of income that the poor spend.

all your plan does is cement the corrupt victory the rich have achieved in riddling the income tax code with loopholes and cutting irs enforcement and so on.


waving the white flag may feel like a victory because they stop shooting at us for while, but actually, it's called surrendering.

Did you even read my post?

I want to do away with loopholes... which would be automatic with the abolition of an income tax system, but are unavoidable otherwise.

yes, your plan would do away with income tax loopholes -- along with the entire income tax. that's been the dream of the rich for a century now.

bottom line, your plan will tax poor people more than they are now, and tax rich people less than they are now.


terrible plan.


yes, there will be a few cases where ultra-rich people pay zero tax currently and will pay some small tax under a national sales tax plan.

but big picture, these would be exceptions to the rule.

terrible plan.

Sure, the rich would want to do away with income taxes (although many have already said that our income tax system FAVORS them).... but they certainly don't want their real estate transactions, equity transactions, nor wealth balances taxed... as would be my far better and simpler replacement plan.

ipos only? do capital gains get taxes? capital gains sounds like income to me, so what's the change here?

what about real estate? new houses only? or do i pay on the profit from flipping a house? again, sounds like income tax to me.

How would a "transaction" tax work? Surely the advanced technology we have today could keep track of such things easily. Not many "transactions" can happen in modern society that technology isn't aware of, if not outright tracking already.

We are at a point of technological development where we can propose new systems and ways of looking at problems and solutions that were not possible even 20 years ago. Just look at the cell phone in your hand to understand what I mean.

So the question becomes: what do the wealthy *do* so much more than average folks? Determine that, then set about a way to tax it.

and, IIRC, Robert Reich has proposed such a scheme.

You are correct in stating a sales tax can also be progressive and, there are many ways of ensuring that.

IMO a wealth tax and a small financial transaction tax would also be a good addition to the mix.

The current income tax system (in both the US and my country Canada) is so complex that few individuals understand it in it's entirety. Wasn't it Jimmy Carter who said the income tax system in the US is a "disgrace to the human race"?

One downside though (and there may well be a workaround I'm not aware of) is impact on the tourism industry i.e. what to charge foreign tourists for goods and services and/or how to rebate the additional costs to them to remain competitive with other countries.

I wonder if similar factors would apply to corporate taxes as well??

Chances of such things happening IMO - pretty much zero. There are far too many vested interests (such as legions of income tax lawyers and accountants and their associated businesses) at play here.

An accumulated wealth tax?....interesting idea. An equal or greater tax on capital gains verses income?....should have done it yesterday. Increase tax rates during good economic times?....should have happened a couple years ago.

Sales taxes are not only the most regressive, but also the most unstable method of generating government funding. Spending is much more variable than income. Trust me. I was born, raised and lived many years in a state that relies almost entirely on sales taxes. Bad times always meant massive declines in tax revenue and equally massive cuts in government spending, at preciesly the time government should NOT be cutting spending. Even if a government entity isn't required to balance their budget, there's still a massive incentive to cut spending as revenue drops and deficits climb.

I agree we need to greatly simplify the current system, both individual and corporate, but lets not throw the baby out. Greatly reduce the loopholes and complexity. Tax cap gains at at least the level of income. Increase the upper brackets significantly and likewise, cut the lower brackets. Set up a system where upper brackets increase with business cycle in order to clear off the economic froth. Likewise, automatically cut rates as the economy declines.

They don't have to be, especially when items can be excluded and when taxes can be rebated.

"also the most unstable method of generating government funding"

That's a myth. There's a high correlation between sales tax and income tax revenues. When one goes up so does the other, and vice versa.

"Bad times always meant massive declines in tax revenue "

True for income taxes, as well.

As long as we're going to stick with an income tax system, though (and I don't see that changing), I agree with your other points, except that it will always be complex. That's the unavoidable nature of income determination.

If, like most people, you live paycheck to paycheck, you'll be taxed on nearly 100% of your income. If instead, you only spend 10% of your income, then you would thank the High Heavens that there's a national sales tax that spares 90% of what you make from the government.

Certainly anyone in business would get further breaks by putting everything in the company name. You'd drive a company car, buy furnishings on the company credit card, and deduct clothes needed to conduct business. Anyone who says "no loopholes" is lying if they claim pizza shops would have to pay a sales tax on every daily supply they need to run it.

A national sales tax is just another way to shift the burden down to working class consumers who can least afford it. It would also bring exempted people below the poverty line into the new taxpayers club and stifle consumer spending when compounded by state and local sales taxes.

You sure you're at the right site?
Oblivious nonsense, unsupported by econometric fact
Happy?

An income tax system guarantees it, and I spelled out why in my OP.

Is that you could not find a single credible economist to agree with your position.

Ever hear the one about how you should quit digging when you find yourself in a hole?

LOL.

Says you.

I can’t name one.
Would you please provide the name of one?

Note that uncooked non-luxury food is exempt from VAT in the UK. So are many other essentials.

That is what Canada does.

because if my corporation has to pay a sales tax to buy parts and supplies for other US companies... i'm not going to buy from US companies. so how do you make sure corporations pay their share?

Nothing wrong with a progressive income tax and a VAT.

The top bracket of the income tax can be raised or lowered. The threshold to reach that top level can be raised or lowered. That is a powerful lever for a Finance Minister (or Treasury Secretary, with the consent of Congress) to have their hand on.

Here in Europe, VAT has proved to be government heroin: introduced at 10% or so and steadily increased, never reduced, to accommodate ever increasing need for governments to sustain their own bureaucracies. Since it is applied to much in the way of food, clothing and public transportation, yes it does hit lower incomes hardest. They even subjected the gross gasoline price to VAT, i.e. you pay VAT on bothe the price of gasoline AND the mineral oil tax applied to it. You pay a 19% tax on the other tax.

The wealth tax here was correctly labeled a jealousy tax, and was declared unconstitutional under the post-war German constitution, which forbids double taxation (seems the people who wrote the German constitution remember the 1938 scheme of how to relieve Jews of their possessions, and didn't want a repeat). Also, the argument as to what to subject to VAT is ongoing and ever changing.

At one time, the Germans decided to tax gold, which has a profit margin of between 0.5% and 2%, at the full 19% VAT. Billions in gold transactions (and a few thousand jobs) immediately left for bordering countries before some genius pointed out to the German Government that if dealers have a profit margin of 2% on something, you can't tax it at 19%, or no one will buy it in that country. Wisely, Germany, and the rest of the EU, saw what what was going on, and removed gold from being taxed at all (the jobs promptly returned), and the Germans are now again collecting taxes on the profit margins and the salaries they once chased away.

In the USA, each state has the right to institute its own sales tax and income tax. As long as that is the case, we don't need to institute another sales tax on top. Talk about accounting nightmares. And who gets to redistribute the money from VAT to the states if their right to levy a State sales tax is removed? And what if some states feel they are unfairly shortchanged? To whom do they address their protests? A Senate majority leader from a major "taker" state? Talk about falling on deaf ears. Taxing a country as big and diverse as the USA is going to be complicated, no matter what. Risking making it worse than it is seems a dubious solution at best. It reminds me of nothing so much as GW Bush saying a dictatorship sounds fine as long as he is the dictator.

Sales taxes are inherently more regressive because people in the bottom two quintiles spend much higher percentages of their income just to survive.

A tax partner in the giant international accounting firm I initially worked for in Los Angeles told me not to worry about adoption of a VAT ruining our tax work. He told me that our European offices had tons of work tracking the value added from one step in the production chain to the next. A tax on value added requires calculating the value added at every stage where a transfer happened. So I doubt there will be much efficiency in reduced tax accounting. But a tax on sales rather than income will encourage savings. The regressive problem can be partly reduced by sending every consumer money January 1 to compensate for the sales tax a low or moderate income person will pay, say $3000 or $5000.