Assuming the Republicans really are planning such an attempt, how would the economy as well as the middle and lower classes be affected respectively by either a flat tax or a national sales tax?
It seems to me that a flat tax would necessarily increase taxes on the middle class while a National Sales Tax just doesn’t seem like it could possibly generate enough revenue.
IANA Econonomist. I admit that understanding this stuff is a weak point for me, so I’m not going to take a strong position yet except to state that I have an instinctive suspicion of anything that helps rich people or the GOP.
I also doubt that such a proposal would have much chance of passing. I suspect it’s merely an election year stunt on the part of congressional Pubs. Promising to get rid of the IRS sounds good to voters even if it may not be politically feasible or practical.
Anyway, I think it’s worthy of a debate. So tell me what’s right or wrong with this idea. Is my knee jerking too wildly? Is it not jerking enough? I want to hear from the people who are better informed about this kind of thing than me and can understand the math.
One of the intersting things about a sales tax is tat it only affects money that is spent. Shifting the burden of tax revenues from income taxes to sales taxes would make borrowing to spend even more expensive than it already is in relation to saving to spend.
I’m not sure if many politicians are willing to live up to that sort of a proposal that’d make incentives for reducing consumer spending.
Many PACs that provide instruction and guidance to our law makers depend consumption on the part of the populace.
IANA economist either (though I’ve worked in economic history), and that too appears to me to be the fatal flaw. If there’s no tax for those who save, and relatively high taxes for those who spend, it would certainly hurt those who make a living making or doing things that people spend money on. Which is pretty much the greater majority of the nation.
I’m sure that the economy could be adjusted. But I doubt that any long-range plan, no matter how vital, rewarding, or necessary even f it were well planned coudl generate enough political will ifit involved anything beyond a certain level of discomfort.
I can see the benefit of collecting the tax as money is spent compared to the current burden of chasing the cheats when they don’t file, regardless of their incomes…not to mention that illegal immigrants (a financial black hole to California’s state budget) wouldn’t avoid the sales tax either. Tourists dollars too.
I like that aspect of it.
Maybe a smaller tax on necessities such as food, mortgage/rent and clothes for everyone, and a higher tax for everything else.
The last time I heard a Federal VAT proposal, it exempted people under a certain income level. Not sure how that would be enforced, probably with an exemption card.
I’m all for the idea of a Federal sales tax. I would like to see food exempted from sales tax, as it is in most states. Also, I think that items purchased at charity thrift shops should be exempt.
If people were taxed on their outgo rather than their income, it would make it easier for low-income people to save.
The best argument I’ve heard against a Federal sales tax is that the wealthy would be able to avoid paying it by purchasing their high-dollar items from abroad. Apparently these people have never heard of duties and tarriffs. I think that the duties should be a percentage of the value of the item in either U.S. dollars or the currency the item was purchased in, whichever is higher. Also, it should be based on what the item would sell for in the US, rather than on the price purchased for in its country of origin. That would reduce the problem of the wealthy finding new and exciting ways of getting out of paying their fair share.
Maybe a dumb point, but I’ve always wondered: If taxes were collected at point of sale, rather than income, how would they nail drug dealers and organized crime figures? (tax evasion being a big way to prosecute said individuals).
Wouldn’t a sales tax instead of income tax put some professions out of work?
Some CPA’s, H&R Block, etc.?
I can just believe that it might be possible to eliminate Federal Income Tax. But eliminate the IRS? How does Dennis Hastert envision enforcing the collection of a federal tax without a federal tax collection agency?
Its the utterest hogwash, pure Bushwah. Trial lawyers? Hah! Meet tax lawyers, consultants, financial advisers, the entire army of Moloch that earns its daily bread making sure rich people stay that way. The Republicans are going to slip these people the shiv? In a pig’s ass.
This all smoke and mirrors, another grandstanding play to pander to a subgroup of the base - the tax freaks. Not nearly so numerous as the fundies, but still important, especially as things tighten and that little vien in Karl Roves temple starts to throb.
They’re going to overturn the entire tax/financial/special goodies for special, special people mishigas in one swell foop? Hundreds and thousands of MBA’s and accountants, asking if you want fries with that?
If they really are going to do this, it strikes me as a politically dumb move. I mean, why would they? They MUST know that the chances of succeeding are small, and I can see two reactions: either voters will realize they can’t, and resent them for promising something that they’ll know that the Bush campaign knows can’t/won’t be done, or afterwards, when it doesn’t get done, voters may punish Senate/House Republicans in the polls.
I’m just wondering what the value of this move would be. If they wanted to reach out to certain blocs of voters, why start here? Why not on a less controversial and more managable issue?
Seems like such a complete non-starter that I can’t believe that the politically savvy folks over there would even try it.
Oh, and one more thing: the Drudge article makes absolutely no connection whatsoever between Hastert('s book) and the Bush campaign. All the connection I see is that introductory sentence that says, without any other support, that Hastert’s views will be the “centerpiece” of the Bush reelection campaign. What the hell gives?
A sales tax could theoretically replace income tax but it would have to be pretty high to do so. The last time I recall someone offering a figure it was 29% (and it was being disputed as probably too low).
So assuming a tax rate of around one third, I could foresee a large segment of the economy going off the books. People within driving distance of Canada and Mexico would have a huge incentive to bring goods across the border (and existing free trade agreements prohibit duties and tariffs) for personal use and resale.
The simplest way is to simply collect a bit more than it actually takes to run the government and distribute the surplus equally to all legal residents. This protects people from being taxed on bare-subsistence expenditures without creating a bunch of stupid arguments about which items ought to have a “necessity” exemption.
The best proposal I’ve heard included a mailing, every January 1, of your pre-tax refund. Basically, it was an allowance for being alive as of December 31 of the previous year, meant to offset the taxes each individual would pay annually for necessities such as food, clothing and hygiene items.
The best thing about moving completely away from income taxes (for anything, this would also have to eliminate withholding for social security and so on) is that an entire layer of administration would be eliminated which would cut the costs companies are currently paying for payroll administration. The thinktank that has done the most research on this (TMK) has suggested that at a certain percentage rate, the offset difference between what is saved in payroll costs would actually be enough to avoid significant increases in prices as they currently stand. (Not considering any inclination on retailers’ parts to view the payroll savings as extra profit and raising prices anyway.)
It would also make tax costs more transparent to citizens, rather than just having tax dollars disappear before we touch them. It’s impossible to oversee how our illustrious elected officials are making use of our money when there’s a cognitive distance from withheld tax dollars as actually being “our” money when we never lay hand on it.
The bad thing – depending on your perspective, of course – is yes, a whole lot of tax preparers, accountants and lawyers would have to find a new way to make a living. HR Block and Jackson Hewitt would go out of business, and wouldn’t be able to bilk the mathematically illiterate and forms-paranoid any longer. That would just be horribly sad.