National Sales Tax?

[The Real Bingo]

As I've trying to expand my intellectual horizons, I have stumbled upon this article at CNNMoney. Bush and a bunch of other proponents of the administration are trying to reform sales tax now, and I don't know what to think.

Quote:

• One tax rate The bill pending in Congress that would establish a sales tax-only system sets a single nationwide rate of 23 percent which, including existing state and local sale taxes, would actually come to about 30 percent. Critics counter that the rate would have to be closer to 60 percent in order to keep government tax coffers full. So the new $99 iPod Shuffle that costs about $105 in Michigan today? It would cost an additional $23 to $59, depending on the federal sales tax rate used.
  
• No withholding....Though each purchase would cost more, you wouldn't have money taken out of every paycheck for Social Security, Medicare and federal income tax.
  
• What gets taxed? It wouldn't be just clothes and cars. The services provided by doctors, lawyers, barbers and others comprise a big part of consumer spending. To keep the government funded at current levels, hospital visits and hair cuts would be taxed. Not taxed: existing home sales and other second-hand items as well as corporate purchases.
  
• Provisions for the poor To protect low-wage earners who are excluded from income taxes today, a national sales tax would have an exemption for all taxpayers to offset the taxes on spending equal to or higher than the federal poverty level, now about $9,800 for an individual and $19,500 for a family of four. How would consumers get the rebate? The "Fair Tax" legislation envisions monthly rebate checks, about $188 for a single taxpayer or $375 for the family of four.
  
• Bye-bye IRS A world without income taxes means no more Internal Revenue Service. Ensuring tax collection would fall instead to the states, a new federal agency or some combination of the two.
  
• Speaking of states Forty-three states levy income taxes -- including four that don't collect sales tax at all. Since most rely on the federal code to work, these states would have to make some choices. Most likely they would abolish their own income tax code and institute a sales tax. For those that don't, April 15 would live on.

On one hand, it's great in the fact it would do away with the IRS and filing for income tax every year. But on the other hand, a pencil would end up costing $5.00. I suppose the abolishment of an income tax would offset the increase in product price, which in my mind would make the reformation of income tax pointless. I also don't see how it would stimulate economic growth. Obviously, people have to buy their necessary items such as food and clothing; but why would someone want to go out and spend an extra 30 percent on a video game or a stereo system?

What do you think?

[GroundZero3]

I have been wanting to read into this more, the idea of me getting my full pay check sounds great.

Being a part time working and going to college, it concerns me on the cost of items if this happens

I guess i have to do some more reading to understand how this works

[originel]

I hate this idea.

Sales tax is regressive, so therefore i do not support it.

The only type of "universal" tax i support is something that is flat.

[tony_j15]

I love the idea of reform, but I dont think this is the way to go at it.

[ShawnD1]

This system sounds nice and all, but it won't work.

For a middle class guy, let's say $50,000 income, who spends $45,000 per year, his taxes would be (0.3)(45000) = $13,500. That's 27% of his income; probably less than what he paid under the old system.

For the upper class guy, maybe $200,000 income, who spends the same $45,000 per year (he's really tight with money), his taxes are still $13,500. That's only 6.75% of his income; much much less than it was before.


It's silly to assume rich people will live like peasants to avoid the tax man, but it is very reasonable to assume rich people will spend a smaller percentage of their income than middle class people. Lower-middle class people will spend maybe 90% of their money if they are responsible, 100% if they are irresponsible, or >100% if they're absolutely retarded. Upper class people will probably spend less than 70-80% of their money while the rest goes into investments which don't have sales tax on them.
The numbers just won't add up. The country will either go bankrupt or the sales tax will go up to 60% like your quote states just to keep up with current tax revenues, and lower-middle class people get raped in the process.

[originel]

That's exactly why it's a regressive tax Shawn . Simply put the rich doesn't proportionally buy as many taxable items as the poor to relative to their income. Yes they spend more, but the increase does not match the increase in income.

Ideally we would have a flat income tax without other progressive/regressive taxes, but i don't see that happening. Incendentally, sales tax (and other non-flat taxes) are one of the reasons income tax isn't flat so that it can attempt to balance out the overall taxation when everything is added up.

[duckhunter-deux]

I'm like Ground Zero, I like the idea of getting my whole paycheck, but if things cost more in the end, won't it even out? I guess I'll have to read more about the subject.

[brandon184]

My life was a lot easier when I worked for a company and the government collected their share before I even received mine. Now that I'm a business owner, it's an entirely different story.

[samwichse]

I hate that the poll option is "Bush is a moron, so anything he does is bad."

I think this is a stupid idea, and not just because Bush is a moron, but because it's a stupid idea.

http://seattlepi.nwsource.com/local/...ngtaxes09.html

Tennessee has the same setup, and ironically the poorest fight changing it the hardest. Oh well.

Sam

[RADAR1797]

I am more interested in a flat tax than a national sales tax, but we could implement a national sales that would not be as regressive as what is outlined above and would encourage saving. If every money transaction was taxed (ie buying stocks, lawyer fees, clothes, etc...), but interest was not, it would effectively discourage consumption for saving. Also, it would make mortgage payments and loans tax free. The stock market wouldn't like, but if the tax rate were low enough and all of the FICA, medicare, state and local taxes were rolled into one process, it could be very efficient. That being said, it would seem to me that a form you file annually stating how much money you earned (no matter the source) multiple by .15 and that is what you owe Uncle Sam would be easier.

-RADAR