Consumer tax?

Avatar for camilionag
iVillage Member
Registered: 05-11-2003
Consumer tax?
19
Fri, 05-21-2010 - 4:10pm

My classmates and i had a debate regarding what would happen if we went to a consumption tax instead of an income tax. The rich seem to know all the loopholes and the middle class end up paying a higher % anyway. At least a consumption tax would make people who don't pay taxes (illegal income or other methods) contribute to the bottom line.


What are your thoughts? Would you rather have your income taxed or pay double taxes on only the items you purchase?


The classmates that argue this is similar to socialism think that people will stop purchasing luxury items due to the excessive taxes. Do you agree?


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iVillage Member
Registered: 03-27-2005
In reply to: camilionag
Fri, 05-21-2010 - 4:40pm

My SIL lives in Denmark and has a low income. (She's a divorced American so she has a hard time getting full time employment).

iVillage Member
Registered: 07-26-1999
In reply to: camilionag
Fri, 05-21-2010 - 7:59pm

I think an income tax is more fair...I know full well that wealthy people (who can afford accountants to do their income tax and find all the loopholes for them) often get away with heaps of loopholes...

But I don't think a consumption tax will be more fair. If you make a lot of money, tax on food and clothing isn't a big deal. When you don't make very much money, tax on food and clothing is a huge burden relative to what it is for wealthy people.

Where I live the tax laws are changing July 1st and the provincial sales tax is being merged with the federal sales tax. Along with that change in tax laws is the elimination of many exemptions from the provincial tax....for as long as I can remember there hasn't been provincial tax on food, children's clothing, school supplies, energy saving devices, strata fees, but with the new tax as of July 1, there will be tax at the new rate (12% instead of 5%) on all those things and many, many more that I haven't mentioned.

It is going to hit poor and working class people really, really hard. I am not a communist...I just feel for the poor and the working class like myself that struggle to get by. The wealthy aren't going to notice the new tax, but it is going to take a lot more out of my income...and I am pretty sure the income tax rates aren't going down either.

Bex & Kate, wanna chime in? I know you are facing the same thing in your province, but I don't know if you are losing the exemptions you used to have provincially.

iVillage Member
Registered: 12-04-2006
In reply to: camilionag
Sat, 05-22-2010 - 3:01am

I'm definitely not a fan of a nation going totally to a consumption tax in place of an income tax. The reality is that a person on a lower income will always pay comparatively more in terms of tax in relation to their income since they are more likely to need to spend all of their income.

In New Zealand, we have just had out budget announcement for the year. Everyone has been given income tax cuts that take effect on October 1, because GST (Goods and Services Tax), our consumption tax is going up for 12.5% to 15% on the same date. Everyone is supposed to be, in theory, better off from the tax cuts. The problem that I have with all the tables and calculators that are available to give an idea of the changes is that they assume that a person is spending all of their income on things that include GST, which isn't normally the case for people on higher incomes. I haven't got figures in front of me - but I may post some examples if I can find yesterday's paper.
I guess what I'm trying to get at is that while a consumption tax would mean that those who don't pay tax for whatever reason would end up paying tax to some degree - in general these types of taxes tend to have a higher impact on those on low incomes who are usually the least able to cope with it.

Lyn

Lyn

iVillage Member
Registered: 04-16-2008
In reply to: camilionag
Sat, 05-22-2010 - 2:31pm
Some countries have a "luxury tax" on certain consumer items, such as alcohol, perfume, cosmetics, basically a tax on non-essentials. It makes a lot of sense in theory, but often there is a huge grey area between milk and eggs and $4,000 per kilo black truffles, or winter jacket and snow boots for children and someone's designer ball gown.
iVillage Member
Registered: 03-27-2003
In reply to: camilionag
Sun, 05-23-2010 - 12:54am

I think we would be better off with a flat income tax rate system.

iVillage Member
Registered: 03-15-2005
In reply to: camilionag
Sun, 05-23-2010 - 12:22pm

If you get a $1000 raise, you will still be taking more home.

Jennifer


 


iVillage Member
Registered: 04-16-2008
In reply to: camilionag
Sun, 05-23-2010 - 7:05pm

Where do you get the 15% number? I wonder if that will be sufficient to support the infrastructure of any country, things like highway maintenance, fire fighting (even local fire departments get federal funding), public schools, national parks, etc.

Earlier on when someone said "the rich get richer", I mentioned that people make more money because they invested in education, hard work, and planning and I got blasted. A 15% flat rate tax essentially makes it even easier for the rich to get richer.

Personally I think consumer tax on non-essentials are good, because it discourages spending (we as a country - I mean the US - spend too much). It may increase saving rate and help reduce environmental damages. The economic model of the US, however, is based on consumption. If everyone stops buying things, it will suffer.




Edited 5/23/2010 7:07 pm ET by demontespan
iVillage Member
Registered: 08-24-2007
In reply to: camilionag
Sun, 05-23-2010 - 7:51pm

Rebeccalouise, I think you said it all!!

Kate


empty purse

iVillage Member
Registered: 03-27-2003
In reply to: camilionag
Mon, 05-24-2010 - 12:42pm

The 15% wasn't based on anything - it was just a number pulled out of the air to make the point.

iVillage Member
Registered: 03-27-2003
In reply to: camilionag
Mon, 05-24-2010 - 12:46pm

Thanks for explaining that Jennifer.

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