OT: National Sales Tax
 

what does everyone think of this idea? instead of a income tax that tax how much you make. How about national sales tax that tax how much you spend instead.

The more i been thinking about this idea the more i like it. I hate doing my taxes each year.

So if I borrow some money and buy something really expensive I would have top pay a godly tax? What about groceries (do you live in america? or just buy only supermarkets?). It's flawed anyway. As long as someone can motivate they are not spending or somehow bypass spending in the country by just spending elsewhere and paying for it to be imported or something he pays nothing back to the state. In the end you have money to spend it, so taxing now means you simply pay the tax for what you would spend later.

I have a better idea: get rid of the income tax and replace it with nothing.

I'm fundamentally okay with a NST as long as it *replaces* income tax. However, there are inherently regressive features to a simple NST that tend to overpunish the poor percentage-wise (as Cats notes). So it would have to be mitigated with some waivers that we could spend all day arguing over which ones were a good idea.
(examples: no tax on food? a way for people to get some money back at the end of the year based on salary level by keeping receipts? etc etc)

The good thing about an NST is that it captures a lot of revenue that normally the wealthy and corporations scamper away from via tax loopholes. It can be annoying for small business since its additional record keeping and forms handling.

It also encourages saving... something Americans have completely forgotten in their race to see who can accumulate the most debt.
I guess you don't mind doing without roads, police, defense, mail, science research, public safety, food safety, product safety....

Income tax doesn't pay for any of that.

Roads are paid by taxes on gasoline. Mail is the Post Office and is self sufficient. Everything on that list isn't paid for with the income tax. Government doesn't need to be subsidizing scientific research, public safety, food safety, nor product safety anyway.

Only about one-third of the federal revenue comes from the income tax.

^Corporate taxes are income taxes (any financial income is taxed, whether it be a person, corporation or other legal entity).

Personal Income taxes are used to pay for social security, health, and defense, with most going to the first 2. So, Income taxes are used directly for Defense, even if they only represent a portion of the Defense budget (Congress and the Presidency have been foolishly overwritting bills for far to long).

For a complete breakdown of where your money goes, please see here: Budget of the United States Government.

Yeah, technically one's wages shouldn't even be considered income, but this conversation was generally oriented towards the personal income tax.

Two-thirds of the personal income tax is wasted or not collected, the rest is absorbed in paying on the national debt.

Need to see some numbers and the effect it would have on government. We already have a huge national debt that has to be paid. Would just having a sales tax help reduce that debt?

As an aside: Are you one of the individuals that feels that the 16th Amendment was not ratified?

Whether Personal Income taxes be voluntary or not (the wages vs. income argument), I do support their basic design, and if they were used exclusively for what they were supposed to be used for (to better the lives of the citizens within the country), I would be a full supporter of personal income taxes. As they are, though, the personal income taxes are highway robbery of the highest degree, with nearly all aspects corrupt or misused, if not both.

The national debt needs to be paid off by getting us in the black through cutting off government fat.

Right now it is necessary to get people's wages in their own hands so they can start having savings again instead of living off debt. A lot of the markets will boom if you let people have all of their money. Housing will increase without artificial lowering of interest rates and it could even help ease the pain of the market correction that is coming. Job market will boom as more small businesses will be started and there will be more money in the system to support these businesses.

Count me in as another who wouldn't mind so much as long as it's a replacement for the income tax. It encourages saving, and if spending needs to be encouraged at any point, it's easy enough to temporarily lower it very slightly and spur shopping sprees (with increased sales volume making up the difference). Straight sales tax does shift the burden toward the poor, though, which is why the FairTax is interesting. However, the FairTax is also too voodoo-y to gain traction.

My primary desire is for tax to be both simple and DIRECT. Right now USians have no idea how much they pay in taxes because so much of it is hidden by taxing the corporations (employment tax--your income taxation is TWICE what you think it is--and corporate tax... these all just get rolled into higher prices).

Every individual should be aware of exactly how much they are paying in taxes. Otherwise there is no accountability.

Of course, I also believe that taxes in the US should not be levied by the federal government, but instead by the state.

FairTax is anything but fair. Under the FairTax, the price of new homes will skyrocket. All the materials used to build the home would be taxed and then the house itself would be taxed when sold. Imagine a 30 percent tax added onto all building materials and then onto the house itself. Then add on the interest to pay that tax.

Health care and legal services would be taxed, so would housing rentals.

Very interesting points, Kyuusai, especially the last one. State rights, or Federal rights? It will not be easy to repeal the 16th Amendment, that's for sure.

Now, I've heard stories of how hard it is to calculate how much tax to pay in the States. That goes back to Kyuusai's point: Can a direct taxation scheme NOT be simple? Can a simple scheme NOT be direct?

Fareed Zakaria has a theory about why the US tax code became so tedious in one of his books.

I'm down for NST as long as we dismantle income tax, and simplify tax codes.

Once NST is implemented, price tags should have 3 indicators...

1. MSRP
2. Total (MSRP + tax)
3. NST percentage.

Just a disclaimer that I never called the FairTax fair. :)

However, no, if the FairTax plan were implemented, buying wholesale would NOT incur taxes, and while rentals would be taxed, the investment property itself would not carry the same tax as before... and there's also the "pre-bate" to cover that part of it. Health care is another matter, but there are several arguments there that this is just the wrong thread for.

I'm not a big fan, but I'd support it if it (or any of a number of flawed-but-better-than-the-current-system plans) came up as a serious option--primarily because once the leap has been made to another system, switching to a more sensible system will be easier.

Soo... if I saved 50k to buy a nice car, I would simply get charged a crazy amount because I saved money and now i'm spendind it?

Don't think so. I think this system is flawed in which you are punished for what you spend. You wouldn't want a system in which the system antagonize a buyer to not spend money. I much rather have a system in which you are penalize for the amount you earn than what you will spend your earnings on.

This is a fair point. In addition I can see this creating a large black market for a lot of goods. This might end up creating ideal conditions for organized crime since pretty much everything is now potentially profitable to smuggle in.

A national sales tax would be extremely regressive (poor people would be paying more than 3 times the percentage of their income in taxes than middle class people, and many, many times the percentage of rich people).

Actually it could be much more regressive than that, because the sales tax would have to be pretty high, and the higher it is the more regressive the tax becomes.

History shows that more regressive taxation is not good for the economy. It essentially takes money specifically out of the hands of those who need it most and were going to spend it.


America is also too big for a sales tax. It would be unfair because expenses vary so much in different states. People in expensive states would be hit twice, first by the higher expense, and then on top of that with higher sales tax. Even within a state, cities (which have more poor people) are more expensive than suburbs (more wealthy people) to buy stuff in.

Which of these sounds more fair:

1. If you make more, you pay more.
2. If you pay more, you pay even more.


Having said all that, I do think sales tax works better than income tax on a state level. States are small enough, and have a narrow enough focus, to pull it off. And the progressive federal tax can balance out the regressive state tax.


Obviously the top priority needs to be cutting spending so that we can responsibly cut taxes, but that goes without saying.

This.

Argentina has a 21% tax on spending, and the income tax bar keeps rising and rising.

I don't need to tell you who are the ones being harmed the most by such a policy.

Singapore has a Goods and Service Tax of 7%, and the income tax bracket is quite generous. I think TinyRedLeaf might be able to elaborate this better.

(Just analysed Lenin's Last Testament for an 1.2k word essay, so pardon my lack of details.)