So do you really think those in the underground economy would be collecting a national sales tax on behalf of the government?
Methinks one needs to understand what underground economy really means.
Duckster, the definition of “underground economy” in this argument has generally been income, typically in the form of cash, that is derived from illicit means and is not currently being claimed on any 1040s. A switch from a document-driven income tax model to a point of sale consumption tax model would bring those earnings into the scope of revenuers for the first time.
I’ve long been a fan of the ideas from FairTax.Org. The idea of putting H&R Block and Jackson Hewitt and all of those shyster tax lawyers and accountants (no offense, Taxguy, I’m not talking about you!) out of business appeals strongly to my notion of democracy. There is no reason why there should be an entire industry built around the interactions between citizens of a representative republic and an agency of their government. Nor is there any justification for a system of interaction between citizens and government which requires legal scholars to understand all of its regulations and dicta, and which has the power to jail citizens or confiscate their property – or both – when they aren’t up to the task as well as those scholars.
unless, of course, that income derived illicitly is derived from goods and services that are purchased and sold illicitly and on which no one pays sales taxes.
Changing the tax system w/o cutting gov’t spending just shifts the tax burdon around and creates a whole new industry for figuring out how to get around the new tax.
I’d much rather see us work towards a significantly simplified income tax system than turn the economy upside down with an entirely new system. My preference would be somehting like Dick Army’s flat tax plan, phased in over 5-10 yrs to avoid disruptions to the economy. That plan gives the gov’t 2 simple levers to adjust tax revenues as necessary-- the mount of income that get’s exempted on the low end, and the rate of tax on the remainder of income.
Or, if we have to have a gradulated tax, at least set it up like Army’s plan. A single, large deduction for a minimum income level-- no deductions for all the social engineering crap we have in there now.
Exactly. This happens already when there is a disparity in sales taxes across states. People smuggle cigarettes from Virginia into New York, and when I lived in Western New Jersey people often bought big ticket items in Pennsylvania, which had lower sales tax. You were supposed to declare this, but no one did.
Plus, sales tax is regressive, and the feds would have to find some way to replace it for the states, because it would get really high.
European dopers - isn’t the VAT basically like this?
As per the old saying: Tax something, and you get less of it.
Simply apply that to l"egitimate, reported sales activity."
Hello, barter system!
OK, I’m gonna go fast and furious on yer asses, so hang on:
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I agree that a sales tax is not a panacea to the “underground economy”–it just creates a different underground economy (and I guess you could argue that it’s easier to track down non-participating sellers than non-participating income earners, but I don’t know).
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John, the flat tax may make things more simple, but not a lot more simple. You still have to determine what “income” is, which is difficult sometimes (hell, some people pay me a bunch of money for my thoughts on the matter).
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A VAT differs from a sales tax in that there’s no resale exemption, meaning that a tax is added at every level that value is added to a commodity. Most economists hate VATs because they are one of the most distortion-inducing types of taxes, and some fear a national sales tax becuase they don’t want it to turn into a VAT.
Maybe more later.
You realize, of course, that the first U.S. income tax was passed in 1861.
And it was repealed in 1867.
And the U.S. didn’t start having the continuous, business-as-usual income tax like we do today until 1913.
So, are you saying that before 1913, people in the U.S. “killed, raped and enslaved each other without penalty”?
“Taxes are what we pay for a civilized society”. – Oliver Wendell Holmes.
There will still be an underground economy even if we get rid of an income tax and replace it with a national sales tax. We will merely shift the paperwork from income to sales. Those who are in the underground economy outside of the present income tax system will remain in the underground economy outside of the proposed sales tax system.
Robbing Peter to pay Paul?
Nope- becuase then the Tax evaders would be the retailers not the 1040 filers. Thus, the “underground economy” wouldn’t be those who worked “under the table” but those who then SOLD stuff “under the table”. And the non-compliance would be huge.
The “entire industry” would continue as there’d be plenty of business for tax Reps to prepare Sales tax records- at every level of sales. Not to mention there’d be need for a huge pile of “regulations & dicta”- if you think otherwise, get ahold of the sales tax laws for your State. And out here in CA- the State Board of Equalization has PLENTY of power to "jail citizens or confiscate their property’ if some one violates the Sales tax regs.
Note also that no one is sent to JAIL for a “misundertanding” of Income Tax Regs- that requires Criminal tax Fraud, which is a whole 'nother issue. Requires Knowledge, Intent, etc.
Sure- back before computers, electricity, the assembly line, and when most people still worked in the fields- they had no need for an income tax. They then had very large Excise taxes (mainly on booze- many times current) and Duties on imports. In today’s modern economy Economists believe that large duties on imports & exports is a BAD thing, not a good thing. But I guess we could try it- lets put a 10% tarriff on everything imported into the USA that we can also make here.:dubious: :rolleyes:
The whole world was so different 100 years ago that you can’t say “hey, they did without an income tax then- why not now”. We did without computers then. Telephones. Cars. Antibiotics. Most nations did without a democratic form of Government, also. Also many things the Feds do now, the States did then.
The thing is- every Industrialized Nation has an Income Tax and depends on it as a major source of income.
Because we used to finance our governemnt with tarriffs. Tarriffs not only financed our governemnt, but it kept americans employed, prevented american labor being replaced with cheap foreign labor, and gave us a high standard of living.
For the most part, very few americans paid any income tax at all from 1789 until the 1950’s. When the income tax was instituted, it was designed so that only a few rich people would pay it, the average wage earner paid little if anything until the 1950’s.
Big business has lobbied for years, to replace our long standing tarriff system with personal income taxes , so that they could hire cheap foreign labor, or move their factories to foreign lands and make more profit. Seems like a lot of individuals also agree with the companies, because most voters agree with the corporations .
NATIONAL REPUBLICAN PLATFORM, ADOPTED AT MINNEAPOLIS, MINN., JUNE 9, 1892 We reaffirm the American doctrine of protection. We maintain that the prosperous condition of our country is largely due to the wise revenue legislation of the Republican Congress. We believe that all articles which cannot be produced in the United States, except for luxuries, should be admitted free of duty, and that upon all imports coming into the United States coming into competition with the products of American labor there should be levied duties equal to the difference between wages abroad and at home.
And The Republican Platform in 1904:
“We met these unhappy conditions vigorously, effectively, and at once. We replaced a Democratic tariff law based on free trade principles and garnished with sectional protection by a consistent protective tariff, and industry, freed from oppression and stimulated by the encouragement of wise laws, has expanded to a degree never before known, has conquered new markets, and has created a volume of exports which has surpassed imagination Under the Dingley tariff labor has been fully employed, wages have risen, and all industries have revived and prospered.”
http://www.presidency.ucsb.edu/site/docs/doc_platforms.php?platindex=R1904
[qote]Yeah, after all, the next generation worries about the interest. But at least, as you say, we have money now.
[/quote]
Uh, money now can be money tommorow, if you care about the next generation. If you want your children to have the money they need to pay off the tax debts that will come due because of interest, all you have to do is buy government bonds, becoming enough of a creditor that exactly balances out your status as a debtor. Give these bonds to your kids, and the problem is solved.
You can argue that not paying down the debt allows you to live well at the expense of your children. But you cannot argue that this is true AND that you don’t like it. That’s like saying that the fact that goverment doesn’t force you to feed your children means, sadly, that your children will starve, and that you don’t like this. My only response to this sort of position is: “eh?”
Worse, the fact is your kids will undoubtedly be better off than you are: more able to bear a larger absolute tax burden because their relative wealth will be larger.
The idea that by not paying taxes today we are stiffing future generations simply makes no sense. By SPENDING, and thereby incurring debt, we might have a problem. But not because we finance this debt by borrowing vs. paying it all now (instead of, for instance, using that money to improve our kids lives now)
There is no basis to assume that our kids will be better off than we were.
To assume such a thing, assumes that we will have more higher paying jobs than we did in the past. Because of our factories and high tech jobs moving to asia, I see no reason why you would think our children will be better off. In all probability, with fewer higher paying jobs, our kids will be worse off than we were, and will have more debt than we had.
If you want our kids to be better off, giving them huge more debt is not the way to do it.
I had long been interested in a flat tax-like system, because it just “seemed” fairer to me. But let me tell you: George Bush is the guy who convinced me that it would be a disaster. And that’s saying something, because I am without a doubt left-of-center in my political views.
During the last tax cut debate, Bush repeatedly mentioned that under his tax plan, a familiy of four making $40,000 would owe about $100 bucks in Federal taxes. I’m all in favor for low- and middle-income folks, espcially with kids, paying less in taxes.
But under any flat tax system I have heard trotted about, their tax burden would increase dramatically - even if it’s just a 10 percent tax on income over $20,000, that family would be looking at their tax bill rise from $100 to $2,000. That hardly seems fair to me.
There is every basis, at least from historical experience: standards of living (especially when you include quality) go up as you move forwards in time. Society might collapse: but if so I don’t see how a huge government debt would matter anyway.
I’m not sure I see what factories or high tech jobs moving to asia has to do with anything. All that can happen AND our wages can increase, all at the same time.
Also, personal debt is not the same thing as national debt: you simply CANNOT think about them in the same way.
I believe I didn’t give the proper meaning to my post about the underground economy and sales tax. When I said everybody buys STUFF, I meant that since we all do buy stuff, even the people in the underground economy, this is where the tax should be payed. UE folk don’t pay income taxes, but they like the rest of us buy homes, cars, food, go to movies, take vacations etc. If the tax was switched to these and the other areas of buying goods and services, everybody WOULD be paying the sales tax. Not a 100% foolproff system[see the bartering post above, and I’m sure others could do an end run in various ways], but wouldn’t we generate more taxes since the people who heretofore paid NO taxes are now paying them? Sounds to simple to be true or good, but how 'bout it?
One major complaint that would be raised about sales taxes is that they are very regressive. They miss a large part of the potential tax base. That may or may not be a good thing, depending on your point of view, but it is a very controversial thing.
So does the income tax. For example, tips are rarely reported.
It’s as good a way as any for the government to steal from people. How else do you pay the salaries of so many worthless drones working for the government.
Dal Timgar