General Discussion
In reply to the discussion: Blasphemy: a National Sales Tax would be MUCH better than our present or any Income Tax system [View all]DFW
(54,378 posts)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.