National sales tax: Pros and cons?

iVillage Member
Registered: 03-29-2003
National sales tax: Pros and cons?
44
Tue, 09-07-2004 - 10:49pm
I'm curious what everyone's opinion is on replacing our current tax code with a national sales tax.

I admit that I have not yet taken the time to do a lot of research on the pros and cons, but it sure sounds good to me so far.

One of my biggest beefs with the current tax code is that it penalizes higher earners just because they earn more. Not a good way to encourage productivity and self-reliability.

And it allows a lot of loopholes and uncollected taxes. A national sales tax might actually collect more taxes since fewer things could be hidden.

The main argument I can think of against it is that it would hurt the poor. But if clothing and food items were exempt (as they are in some states already), that should take away that argument.

What do you all think?

Carrie

 

 

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iVillage Member
Registered: 05-18-2004
Wed, 09-08-2004 - 8:55am
"One of my biggest beefs with the current tax code is that it penalizes higher earners just because they earn more. Not a good way to encourage productivity and self-reliability."

Oh boy...duck...here they come

;)

I am for modifying the tax cut with either a flat tax or abolishing the income tax and replacing with sales tax.

You are right the biggest complaint would be that it is unfair on the poor people. It is a higher percentage of their income thus unfair. Personally this is a garbage argument but a lot of our income redistributionists here will argue with me on that point.

While exempting certain items such as food and clothes certainly seems reasonable (and I'm not necessarily opposed to it) it only starts there. Soon other groups will be clamoring for exemptions.

"And it allows a lot of loopholes and uncollected taxes. "

Lawyers and accountants could potentially be hurt by this plan. I know quite a few accountants that make their bread and butter on taxes. Now personally I would tell them to adapt for retire.

It is a great idea but too many interest groups will fight it, regardless of how much sense it makes.

Jim

iVillage Member
Registered: 04-16-2003
Wed, 09-08-2004 - 10:25am
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Vader is correct a sales tax is regressive, that is it falls disproportionately onto the poor. However, my objection is that many states and municipalities get their income from sales taxes. What rate will consumers be asked to pay if the federal tax needs are tacked on? I would guess the rate would have to be close to 45% to take care all needed funds. This is a guestimate based on the tax rates in states and municipalities, and income taxes of 35% at a minimum.

iVillage Member
Registered: 07-04-2003
Wed, 09-08-2004 - 11:00am
I pretty much agree with you.

Like you mentioned, I hate that our current tax codes penalize people for earning more money. We do want people to succeed and increase their income, right?!

A national sales tax would make tax collecting very simple and easy. I would let food purchases be exempt, but that's all. Too many people aren't paying what they should in taxes the way things are now--there are so many ways of hiding income and making it tax-free, and a sales tax would eliminate those loopholes.

Then again, now that I think about it, a national sales tax would just punish higher incomes just like the current tax codes do. Obviously those that have higher incomes and more spending money would end up paying more in taxes. I changed my mind. I guess I still like the flat tax idea the best. Everyone should pay the same percent of their income for taxes--that's the fairest. The hard part is eliminating all the loopholes so the "rich" can't hide their money.

iVillage Member
Registered: 05-18-2004
Wed, 09-08-2004 - 12:29pm
"Then again, now that I think about it, a national sales tax would just punish higher incomes just like the current tax codes do. "

Actually it wouldn't. Certainly the wealthy would pay more but so would they on a flat tax. If the tax is based on a set percentage then it works much like a flat tax would. You pay more because you are spending more. Fair as far as I can tell.

As far as the actual rate, from what I have read it is closer to 23 % but you no longer have federal income tax. Here in Maryland that would be a total of 28% tax on every sale. Seems like a lot but you no longer have fed income tax, tax returns, IRS, gov't should decrease in size which should be able to reduce the tax burden. Plus no politicking with taxes, playing one group against the other. If a tax increase is proposed it is straight forward, "we are going from 23% to 25%". Let the voters decide.

It'll likely never happen because of that reason alone.

I actually wouldn't mind a provision for lower income families but it may be difficult to implement. No way to easily determine eligibility at the time of sale so you would then need to file a return of some sort to apply for the money back. One thing I would consider would be a tax exempt type of card issued based on earnings. If you present the card the tax is not charged and the credit is tracked to see how much in taxes is being exempted. If you are abusing the system we would be able to track it based on your purchases. In other words, if you present your Tax Free card when buying a Lexus you would no longer be eligible.

Just an idea.

Jim

sorry if this double posted.

iVillage Member
Registered: 05-02-2004
Wed, 09-08-2004 - 1:13pm
Here's a good place to get some information on the Fair Tax Act.

http://www.fairtax.org/

And from that website, how they would deal with being fair to the poor:

No federal sales tax up to the poverty level means progressivity like today's tax system. Furthermore, to ensure that no American pays tax on necessities, the FairTax plan provides a prepaid, monthly rebate for every registered household to cover the consumption tax spent on necessities up to the federal poverty level. This, along with several other features, is how the FairTax completely untaxes the poor, lowers the tax burden on most, while making the overall rate progressive. However, the FairTax is progressive based on lifestyle/spending choices, rather than simply punishing those taxpayers who are successful. Do you see how much freer life is with the FairTax instead of the income tax?


iVillage Member
Registered: 03-18-2000
Wed, 09-08-2004 - 1:23pm

Good topic. If the IRS were dismantled who would be collectively despise? ;) Everyone agrees the IRS is a conveluted & complex monster.


According to this article it's appears that this idea is merely that, an idea. No real proposals or plans that could

 


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iVillage Member
Registered: 05-02-2004
Wed, 09-08-2004 - 1:43pm
Actually, I believe there was a bill dubbed the "Fair Tax Act" already before congress. It was initially introduced January 2003 to the House and July 2003 to the Senate.

http://thomas.loc.gov/cgi-bin/bdquery/z?d108:h.r.00025:

http://thomas.loc.gov/cgi-bin/bdquery/z?d108:s.01493:



iVillage Member
Registered: 03-18-2000
Wed, 09-08-2004 - 2:02pm

What about taxes on unearned income? (interest on investments, invested

 


Photobucket&nbs

iVillage Member
Registered: 05-02-2004
Wed, 09-08-2004 - 2:27pm
Well, there would be no tax on unearned income from investments, nor for invested, inherited wealth. Its a consumption tax. You only pay taxes on the *new* items you buy. Anything bought used is not taxed. So, if you decide to buy a used car, house, or anything it would be tax free. At least federal tax free. State taxes are still in effect.

What is more fair than being taxed on just the items you consume? You get to choose how much taxes you pay by deciding what items you buy. The poor are covered by the rebate. How much more fair could a plan be than to tax what you CHOOSE to purchase?

What I'd like to see, if we continue under the current tax code, is a repeal of the witholding laws. If every individual was made to write a check out to the government to pay their yearly taxes I think the masses would demand a lot more accountability for the money they are require to fork over to the beurocrats.

iVillage Member
Registered: 03-23-2003
Wed, 09-08-2004 - 3:26pm

My


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