National Sales tax

[Beer Snob-50]

I have been intriged for many years about the idea of a national sales tax. I think that if you put this tax on the final buyer of the product (not all along the production process) everyone would pay according to his ability. I would even think about not taxing food and clothing (not gourmet food or clothing over a certain dollar amount.) Can anyone find a problem with this? I have my flame retarded suit on.

[DrGonzoLives]

1. Sales tax = flat = regressive

Pure and simple. Conservatives want a national sales tax so that they can eliminate the personal income tax. Besides, on top of that, you have state sales tax, and God knows what else.

If you are only taxing the final purchaser in this plan, in my view, the violate the Constitution - the federal government regulates interstate commerce - unless the final buyer crosses a state line to buy something, how is it interstate commerce?

[On the Road]

4. The Less You Earn, The Higher Percentage You Pay

because the rich have higher savings rates. That's the biggest problem with it. Even a flat-rate income tax would tax ALL income rather than just the portion spent.

It also penalizes consumption and is thus a drag on the economy.

[shaolinmonkey]

2. It's regressive.

Taxing 5% on items is harder on the poor since 5% of $10,000 per year is far more valuable to a poor person than the 5% of $100,000 is to a rich person.

If we exempted food, shelter and clothing, there might be a starting point.

[tx_dem41]

3. Yes.....for one thing...

its a horribly regressive tax system even with the small number of exemptions you put on it. It would be a huge tax break for the upper economic classes.

I have seen analysis, that to institute a revenue-neutral national sales tax with modest exemptions, the sales tax would have to be in the range of 75-100%, not the 23% that the pro-NST (Repubs) like to quote.

[BlueEyedSon]

5. Natl Sales tax + full year-end refund if you make less than $250k

works for me!

Now how do we handle the guys who buy their yachts offshore or lease them back to themselves?

[papau]

7. LOL :-)

:-)

[BlueEyedSon]

8. Imagine the LIQUIDITY!!!

[papau]

6. That is the GOP plan to limit the tax the rich pay by increasing our tax

The Sales tax is very effective as a tax on the poor and middle class.

It can be structured like the Vermont tax and be realtively progressive for incomes from 0 to 200,000.

Or it can be like Texas and a bear on the poor (I love the Texas GOP quote as they praise themselves "we have a tax that the poor can budget for - if they want to pay less tax they buy fewer clothes")

At the top end the experience with the luxury tax in the early 90's proves that very rich can and will buy outside the US Tax collecting system - and ship whatever to where ever - tax free.


Indeed the EU experience with the VAT, and Canada with the CST - both sales taxes, showed the need to retain an income tax.

[Beer Snob-50]

9. thanks for the input

i have to look into and think of the constituitional question. regarding the regressive nature of the tax, i think the exemption for food and clothing would take care of that. the clothing exemption would not count towards leather coats, furs, designer clothing, and the like. food exemption would only go toward necessities.

[tx_dem41]

10. Do some very simple math.

Your proposed exemptions would do very very little to handle the enormous regressivity of this tax. Also, do you have any idea what the tax rate would have to be for it to balance the budget?

[papau]

11. That is the Vermont type Tax - but you still need Inc Tax otherwise

large sales/income goes untaxed!

The rich avoid a sales tax because they can - so why give them the chance?

Plus "unearned income" (investment income)- that simply builds up assets and increases the rich folks' control of the nation - all goes untaxed under a sales tax.

But that is the GOP plan.

[Beer Snob-50]

15. I didn't consider all that investment income.

[nodictators]

13. Would there be Nat'l tax when you buy a home?

That would be a killer.

Would there be a tax on apartments or condos?

Would other necessities be subject to the tax?

OTOH, there probably wouldn't be a tax on investments.

Of course, people who are middle aged would be double taxed.

We paid tax on the money we earned, and now we would have to pay tax again when we spend that money. So, savings, capital gains, pensions, and Social Security benefits all would effectively be subject to the tax also.

[papau]

16. yes - new purchases mean new tax.

:-(

[Strelnikov_]

19. "people who are middle aged would be double taxed"

So anyone who saved post-tax income will now be taxed again when they spend it by the sales tax that replaced the income tax.

Sounds pretty unfair to me.

[happyslug]

12. The last time I looked at this proposal the Tax rate had to be 23%

And remember that is OVER and above whatever the state tax rate is (and this was with NO exceptions, with the exceptions you want I believe the rate would be 35% plus that state rate).

The best way to kill this economy of ours is to add 35% to the cost of buying something. People will not buy, which will lead to layoffs, which will cause the economy to go downhill even more, leading to even more layoff (You get the picture?).

The devil is in the details, and the details is that the only source of tax revenue that can produce the money needed to run the Government are Real Estate Taxes and Income Taxes. You can NOT run a good economy if your main source of revenue is a Sales Tax.

Here a site that says the rate has to be 45%:
http://www.ctj.org/html/nytsales.htm

Another site that says the rate will have to be 60%
http://www.brook.edu/views/papers/gale/20040812.htm

Here's a Site for the 23% rate, note the 23% includes the price of a NEW HOME. i.e. if you buy a new home you pay the 23% sales tax over and above the price of your home.
http://www.youdebate.com/DEBATES/TAX_NATIONAL_SALES.HTM

Here is another site saying 23-27% (also attacks the author of the article on the 60% tax rate but ignores his actual statements as to WHY the rate has to be 60%). Also assumes a substanial decline in expenditures to make the 23-27% rate:
http://www.salestaxusa.com/taxrate.shtml

[FormerDittoHead]

14. The rich don't spend all their income, won't pay as much tax.

the rich are rich BECAUSE they don't spend as much as they make.

There was a thread here on this previously (in another forum?)here and it was torn to pieces.

The fact is that it would be NOT be "simple". In fact, due to the fact that the Fed will tax things at different rates than states (starting with Delaware which has NO sales tax) the red tape will be considerable.

It STAGGERS me STILL (I hope I'm not boring you all) that ANYONE thinks a national sales tax is in anyway more "fair" and "simple" than a national property tax.

AGAIN, I paste the below from another msg for your info:

...With a national sales tax, every small business person and self employed individual will have to collect said sales tax, changing every cash register, price sheet, etc, fill out an ADDITIONAL 13 forms (minimum) a year along with making 12-13 payments to the fed for the sales tax.

This doesn't even include the mine field that business people will be walking through calculating the various taxes for items that the state charges differently than what the fed will. (NJ: unprepared food and clothing: no tax). Many business people who collect no sales tax presently (produce markets, clothing stores) would have to start.

...and let me bet you a dollar to a donut that sales of stocks and bonds won't be included in the national sale tax plan (guess who owns most of stocks and bonds?)

And don't get me started on the inevitable underground economy!

A national property tax, however, could not be more simple. Your local property tax collector would be instructed to add on a given small percentage on top of your present bill, and mail you the bill.

You don't even have to cut more than the one check you already use to pay your present taxes! Could it be more simple!???

It would involve MUCH less paperwork than an added sales tax, and it will rightly reflect the added use of our gov't resources, services and protections that the rich benefit from.

What's more... IT'S THAT MAGIC NEO-CON WORD... FLAT. The guy who owns a house worth $50,000,000 (Ken Lay) will pay 1000x that of a guy who's house is worth $50,000. (with a caveat, see point #2)

Five final points:

1) Like every state that I'm aware of, taxes on Farm land and other certain properties will be done at different rates, along with other reductions and exemptions (churches).

2) I would suggest some kind of "personal exemption" of some amount (the first $40,000 of value? Pick a number.) (additional for seniors?) for personal residences (not business property) so that someone living in a *modest* house ends up not paying anything more at all. Remember, however, your present, local property tax bill gives you no exception, so this could rightly be phased out (see point #4).

A provision could also be made for apartment buildings to prevent landlords from passing on the added expense. You could simply multiply every rented personal residence (not talking office buildings) by $40,000 and use THAT as a possible exemption for rental property taxes. Any additional amount would then have to paid by renter + landlord.

3) Every dollar of it should go to reducing income taxes. I'm not talking about INCREASING net taxes, but redistributing the proportional burden to those who receive the proportional benefit, UNLIKE income taxes or a sales tax.

4) It would have to be phased in over a number of years (like 10? 20?) but this would be very easy to do.

5) Property taxes would continue to be considered a deductable expense for business activities.

I'm creating a website to more graphically make these points, and to try to provide an alternative to the JUGGERNAUT that a national sales tax will become, and it being a sweeping bonanza to further reduce tax burdens for the rich.

[Beer Snob-50]

17. Wow!

I would like to thank everyone who took what I thought to be a simple plan and added these items that I never took into account. I guess that is what makes us different from the republicans who run things now.

[flaminbats]

20. Why should Democrats support any of this?

Now that Democrats have only 45 votes in the Senate, why would Repukes even want our support? If Democrats ever win back Congress and the White House, that is the time for changing the taxcode.

Naturally repealing the Bush taxcuts should be our first priority. Perhaps we can win some Republican votes by merging this step with the USA tax. http://scholar.lib.vt.edu/VA-news/VA-Pilot/issues/1995/vp950502/05020007.htm

Once this is done..we should remove the income cap from the FICA tax. Dreams are fun, but who listens to powerless backbenchers?

[DaedelusNemo]

18. Something a sales tax might be good for - pollution

In general, i tend more to the notion that we'd be better off without any sales tax at all. But, to consider the possibilities...

There are various ways in which businesses tend to shift their costs onto others. One of those, for example, is pollution. What if you were to assess a pollution tax on items, calculated to represent the cost of cleaning up after the manufacture, use, and disposal of the individual items? It puts that cost right back into the cost of the item which is where it belongs anyway. Instead of deforming the economy, it relieves a deformity. It would give an incentive for people to buy 'green'er products that is exactly proportional to the need.

You wouldn't have to have it as a in-store calculated tax; you could simply require that the producer pay that tax for each item it sells, and the cost would undoubtedly be part of the price they sell it for.

In addition, the tax would be almost entirely under the control of the taxed, a direct consequence of their action. If, for example, they go to the effort of cleaning up after themselves - or simply making less of a mess in the first place - instead of effectively paying the government to do it, their tax would naturally reduce. (assuming they can find a more cost-efficient way to clean it up than the government would use.) For that matter, if they can suggest to the government a cheaper (but still effective) way to clean it up, that would reduce their tax as well. It would be an incentive, for the large-scale polluters, to do research on how to reduce their pollution or clean it up better. It lets the market do its work, while establishing standards.

It is the fairest way i've been able to imagine to handle it.