I’ll just add that a consumption tax isn’t a terrible idea, but it has to be supplemental to a progressive income tax, have large category exemptions for things poor and middle-class people spend the most on (food, housing, medical care), and should be set up as a VAT not a sales tax. You want to slap a 30% tax on luxury cars and mega-yachts I’m all for it, particularly if it goes to support Social Security or Medicaid.
Adding a VAT to the US tax scheme would be a fine way to raise the revenue needed to fund the expenditures the American people seem to want. Hell, if you want to offset some of the VAT by cutting income tax rates across the board, I’m willing to at least listen to the proposal. Replacing the entire income tax structure with a sales tax is idiotic.
It’s amusing that you think the lower class has several thousand in savings. IMO they have none, or are in debt. The middle class is the one that is tough to predict. Very typical that they might be in a lot of debt, but also have a large 401k. What kind of exemption would that provide?
Regardless, congress would never go for this avoid-double-taxation deal, the taxpayers would just get screwed.
A 401K is a tax shelter: you pay no tax on the income that goes into it until you actually take the money out. If there is no income tax, the 401K/IRA premise becomes sort of irrelevant. This could have what I perceive as a net positive effect on mutual fund capitalization (starving them somewhat or very much).
Yeah it’s the folks that used Roth accounts that are doubly screwed. Oh, you prepaid income taxes because you assumed you would might have a higher rate in retirement? Too bad. Instead your rate would have been zero if you used tax deferral (since income tax is gone now), but instead you get to pay a big old consumption tax on top of the income tax you stupidly paid to put your money in a Roth.
It’s just really bad tax policy. If you want to shift some income tax to a consumption tax you do it gradually. You know, conservatively, as if today’s radicals in the GOP know what that means.
House Speaker Kevin McCarthy has backed his fellow Republicans into a corner with one of the promises he made to his far-right flank to land his job: opening the door to considering fringe legislation that would replace the income tax with a federal sales tax and abolish the IRS.
Most GOP members appear determined to distance themselves as much as possible from the idea, and McCarthy himself said this week he doesn’t support the legislation. But Democrats aren’t going to let the issue die quietly. They’ve been more than happy to use it as a cudgel to portray Republicans as dangerous radicals.