I think this is the beginnings of an economy based on perpetual growth and fossil fuel energy running headlong into geological energy constraints. Basically I see an undulatory downward path for the rest of my life. From here out, I think any rallies in our economic condition are going to be met with spiking commodity prices that knock us right back down.
Posted: Sun Jan 06, 2008 11:59 am Post subject: 23% sales tax instead of income tax - thoughts?
On the surface, I like Mike Huckabee's proposal to get rid of income tax and go with a sweeping 23% sales tax instead. The overhead of running the IRS is a big burden ad by piggybacking in most cases on the existing state level sales tax collection mechanisms it would be possible to simplify things a lot.
Also, philosophically, I like the idea of taxing consumption rather than earning, it fits into a conserving society ethic. It would go a long way to encourage people to repair what they have, rather than buy new. I am surprised at work, how many people I know seem to toss decent things out, rather than fixing them. It seems like a whole new generation has lost their mechanical and electrical know how.
Now, the downside. I don't see how Huckabee has thought this whole thing through.
He talks of a rebate mechanism based on incomes. But, wouldn't that imply you'd need the similar reporting and auditing mechanism the IRS now provides to dtgermoie who qualified? Would it be better to isolate food and rent and transit purchases from the sales tax, instead of getting into the whole complexity of the rebate mechanism to take care of the low income people?
Also, what about land transactions. Real estate is not consumed. Some people have jobs which require them to move periodically. So, if over my worklife, I had to move 10 times, and another person keeps their original home their lifetime, why should I have to pay 23% on each real estate transaction? That could be a huge impact to a person who moves frequently.
What about the free trade agreement? If the U.S. levied this 23% tax, would there not be many shopping expeditions south or north of the border? And, these days, its so easy to buy on the internet, and so there would have to be a very stringent tax collection system installed at the point of entry for mail and shipped goods.
Last edited by Denny on Sun Jan 06, 2008 2:38 pm; edited 1 time in total
Joined: Apr 27, 2007 Posts: 4351 Location: The Great Sonoran Desert
Posted: Sun Jan 06, 2008 12:11 pm Post subject: Re: 23% sales tax instead of income tax - thoughts?
expect both _________________ "There must be a bogeyman; there always is, and it cannot be something as esoteric as "resource depletion." You can't go to war with that." Emersonbiggins
"... hope is a rotten-thighed whore" Niko Kazantzakis
Joined: Sep 04, 2005 Posts: 441 Location: central MA, USA
Posted: Sun Jan 06, 2008 12:24 pm Post subject: Re: 23% sales tax instead of income tax - thoughts?
Denny wrote:
Also, philosophically, I like the idea of taxing consumption rather than earning, it fits into a conserving society ethic. It would go a long way to encourage people to repair what they have, rather than buy new. I am surprised at work, how many people I know seem to toss decent things out, rather than fixing them. It seems like a whole new generation has lost their mechanical and electrical know how.
Many things aren't really built to be repairable, these days. (A consequence of the chase to the price-bottom, I suppose.) Or if they are repairable, the parts can cost a significant fraction (sometimes uncomfortably close to 100%) of the replacement cost.
Quote:
Now, the downside. I don't see how Huckabee has thought this whole thing through.
You expect a lot from your politicians, don't you?
I think it's DOA. For one, it sounds regressive (taxes the poor more heavily as a percentage than the wealthy), so it won't win much support from progressives.
But more importantly, how warm do you think the services and industrial lobbies are going to be to a proposal to put a tax on consumption? Domestic consumption's a key leg of the U.S. economy, and we're all supposed to be good little consumers and buy, buy, buy.
On the one hand, I personally don't have a problem with trying to encourage people not to consume as mindlessly as they have been. But I'd need to see details. And I'd need to see things like food and clothing be exempt from it before I could support it, because everyone needs to eat and be clothed.
Joined: Nov 16, 2007 Posts: 307 Location: Rural Western Idaho
Posted: Sun Jan 06, 2008 12:40 pm Post subject: Re: 23% sales tax instead of income tax - thoughts?
I have not thought this through from start to finish (all the ramifications, etc) ... and I certainly am less educated in economics and politics than many others here on the boards.
But in a nutshell, I like the idea of a consumption tax.
If I don't want to (or, more to the point, CAN'T) pay $1230 for a watch, I won't buy a $1000 watch. (23% tax, right?)
Lumpy _________________ "A government big enough to give you everything you want, is strong enough to take everything you have." Thomas Jefferson
Posted: Sun Jan 06, 2008 12:42 pm Post subject: Re: 23% sales tax instead of income tax - thoughts?
Quote:
I think it's DOA. For one, it sounds regressive (taxes the poor more heavily as a percentage than the wealthy), so it won't win much support from progressives.
Thus the pre-bates, which give people who make less money more money to spend on essentials. I believe everyone pretty much gets the same amount so then the poor pay very little in taxes, if any at all since they won't be spending much beyond essentials.
Oh. And it's not a 23% sales tax. That is a flat out lie. It's a 30% sales tax. They get 23% because when you total an item that costs, say, $1.00, then there is a 30 cent tax for a total of $1.30. And that 30 cents in tax is 23(.07)% of the total. It's a nifty way of getting an idea passed through. It really just goes to show you how much of a snake liar this Huckabee is and how he is the essence of a politician, rather than the antithetical to a politician that he is made out to be by the media.
Quote:
I don't see how Huckabee has thought this whole thing through.
You do realize that this is the guy who mocks those that believe in evolution, right? Who adamantly believes the Earth is 6000 years old? And you expected this guy to do actual research and have his opinions based on empirical evidence?
Quote:
But in a nutshell, I like the idea of a consumption tax.
Same. Just a little bit lower. By like 29-30%. _________________ I want to put out the fires of Hell, and burn down the rewards of Paradise. They block the way to God. I do not want to worship from fear of punishment or for the promise of reward, but simply for the love of God. - Rabia
Joined: Sep 29, 2004 Posts: 2330 Location: Pennsylvania, USA
Posted: Sun Jan 06, 2008 1:11 pm Post subject: Re: 23% sales tax instead of income tax - thoughts?
Well, believe it or not, the income tax was originally sold as a way to tax the rich. The income tax was sold to the American people as a tax on people with incomes over $300K/yr. Back then, that was a lot of money - it's still a very nice income. Anyone under that amount wasn't affected by the original income tax and didn't have to file.
Why today, does a single mother working a menial job have to pay the income tax? The tax table was moved lower and lower over the years, particularly during WW2 to help pay for the war. The tables were left that way after WW2, particularly because people didn't bother to notice. Since then, inflation has made people “richer” the point where fast food workers have to pay. It's a great system for the government; they can raise taxes simply by depreciating the currency and nobody notices. Those in the know, who understand things are generally so enfranchised in the system, they don't care. Meanwhile, millions of poor Americans are treated like rich people by the tax system. Worse, the system is so complicated that those with little economic activity (investments, etc) generally find themselves with few deductions. The system favors those with mobile liquidity, i.e., people who can “tax plan” their way out of being taxed. The lowly menial worker with little money is taxed at a confiscatory level.
The national sales tax idea is really not a bad one in theory. First off, it's an excise tax, which is a type of tax that can be enforced without bumping into the Constitution at every turn. Collections would be the responsibility of the seller which would vastly reduce the burden on agencies such as the IRS. It's a tax on commerce, specifically consumption and seems like the right medicine for the economy the way it stands. One of the cons is that it would expand the black market economy, but I really don't think that it would get out of hand.
I highly doubt that this sort of sweeping change is possible however. Can you imagine the pressure from retailers such as Walmart. They would be threatening to lay off thousands, etc. Another faction would be the rest of the world. The income tax is actually part of a treaty which the US signed with Britain and others. America would be sued for trade infractions because the excise amounts to a huge tariff on foreign goods. However, I think that since it is a tax on all commerce, foreign or domestic, the US could slip past that.
Personally, I think it's a great idea. Americans would consume less and it would be a great shot in the arm for the repair business. Suddenly, it might be more cost effective to repair that TV or microwave rather than buy a new one. The tax would push people into a much less wasteful mindset. It's easy to implement, much less regressive and would chip away at the deficit. Poor people who don’t live extravagantly would find they have little tax burden. Most essential commodities like food wouldn’t be taxed. I don't agree with several of the plans being touted however. They have a tax credit offered to people who qualify and that just derails the whole thing IMO. I think that we should get away from the government sending checks to private citizens. People need to go back to living without government intervention in the personal lives. The government can’t afford it and it gives people an entitlement complex. _________________ "That's the problem with mercy, kid... It just ain't professional" - Fast Eddie, The Color of Money
Joined: May 09, 2005 Posts: 98 Location: Western Washington
Posted: Sun Jan 06, 2008 2:10 pm Post subject: Re: 23% sales tax instead of income tax - thoughts?
It seems to me it would hurt the middle class the most. It would have little effect on the wealthy, and little effect on the poor (if they are excluded), but the middle class would carry the burden - kind of like a flat-tax with the poor removed from the equation. I also don't see how it would be able to cover the costs of our government.
I'm not sure that it alone would reduce consumerism, people would be keeping what they ordinarilly would pay in income tax, and as long as they have extra money, or access to credit they would still want those plasma scree TV's, designer purses, ect.
Denny, your location says Canada? How do you see your tax system differing from ours? Is the CRA about equal to the IRS, or is it a simpler system?
Posted: Sun Jan 06, 2008 2:17 pm Post subject: Re: 23% sales tax instead of income tax - thoughts?
FoolYap wrote:
Many things aren't really built to be repairable, these days. (A consequence of the chase to the price-bottom, I suppose.) Or if they are repairable, the parts can cost a significant fraction (sometimes uncomfortably close to 100%) of the replacement cost.
But more importantly, how warm do you think the services and industrial lobbies are going to be to a proposal to put a tax on consumption? Domestic consumption's a key leg of the U.S. economy, and we're all supposed to be good little consumers and buy, buy, buy.
On the one hand, I personally don't have a problem with trying to encourage people not to consume as mindlessly as they have been. But I'd need to see details. And I'd need to see things like food and clothing be exempt from it before I could support it, because everyone needs to eat and be clothed.
--Steve
Steve, I agree that a lot of stuff s not built to ever be repaired, but some can be. An example is my brother-in-law who discarded his VCR because it got jammed up, I picked it up and disassembled it to clean it out and cleaned the heads, etc., I don't think I spent more than an hour and 15 minutes. He found it easier somehow to part with $60 for a new one. Even if he did not have the tools, he could have spent about $6 at a dollar store and picked up what he needed. He just was not motivated. Maybe if he had to pay $80 for a new VCR he would be. I think too many people are lazy these days, they'd rather relax or socialize than get down to work.
Those various lobbies you refer to, they wil be brought into line sooner or later due to peak oil anyway, so why not sooner? I am sure there is the odd enlightened person at these companies who can see the writing on the wall, so they likely have already developed strategies for the inevitable. Companies survived during WW2 when all kinds of stuff was even rationed. I guess it comes down to who controls society, hopefully not the companies.
I am not sure why you see clothing as that important, most of the clothing sold is redundant, it just replaces what folks already have due to style. And, if your are poor you can always shop at a St. Vincent de Paul or Salvatlon Army store. I can get by on just $400 a year for clothing, no problem, even using regular stores.
Joined: May 10, 2007 Posts: 3228 Location: Resiliency Farm
Posted: Sun Jan 06, 2008 2:33 pm Post subject: Re: 23% sales tax instead of income tax - thoughts?
Another issue is all those poor folks who saved. Imagine I saved all of my life and had a 1 million dollar nest egg. Paid income taxes on that 1 mill. now I get to pay taxes when I spend it.
As it is if it ever looks like Huckabee (or the idea under another patron) has any kind of a chance, I am going to go out and buy the last couple off large purchases that I see the need for. (ten acres, barn etc)... I'd rather buy it before the price goes up and pay for it on my tax lilberated income.
What kind of recession would such a change bring (I know it is the least of our problems but this is the kind of argument that would come up) when all of the sudden people start consuming less.
Also, are they going to pay individuals to snitch on their neighbors selling eggs or hay but not reporting it?
Would we have a rebirth of barter as I would rather trade eggs for hay with one neighbor than be bothered to collect or pay the extra taxes. _________________ “It does not do to leave a live dragon out of your calculations, if you live near him.”
Posted: Sun Jan 06, 2008 2:44 pm Post subject: Re: 23% sales tax instead of income tax - thoughts?
FoolYap wrote:
On the one hand, I personally don't have a problem with trying to encourage people not to consume as mindlessly as they have been. But I'd need to see details. And I'd need to see things like food and clothing be exempt from it before I could support it, because everyone needs to eat and be clothed.
--Steve
I have to agree with this. I also agree with the poster who mentioned that income taxes were at first designed to tax the rich and not the average worker. And now the AMT (alternative minimum tax) is beginning to hit people it was never meant to because no adjustment for inflation has been taken into account.
Perhaps what we need is to classify goods into "basic" and "luxury" categories. Basic goods don't get taxed but luxury items got whopped.
The real problem however, is that the rich are fewer in number and don't spend as much on "goods" as the vast majority of workers in terms of percentage of total population. Most of their money goes into "investments" rather than "purchases." So, the idea of taxing "consumption" doesn't really do anything to except take more away from people who can least afford it.
The most essential cultural value that needs to change is to return to conservation and waste reduction, not only at the household level, but more importantly at the engineering and production level of manufacture. Consumers are given little choice and even fewer are mechanically inclined having been de-skilled in such matters.
Merely altering the method of taxation is not going to change an entire culture into one that values anything except money. _________________ -We don't need an ownership society,
we need a 'give-a-crap' society!
------------------------
-Making judgments without intellectual justification is prejudice.
-We do not act rightly because we have virtue, we have virtue because we act rightly.
Joined: Jun 20, 2007 Posts: 550 Location: USS Poland
Posted: Sun Jan 06, 2008 5:42 pm Post subject: Re: 23% sales tax instead of income tax - thoughts?
@NeoLotus
Quote:
I have to agree with this. I also agree with the poster who mentioned that income taxes were at first designed to tax the rich and not the average worker. And now the AMT (alternative minimum tax) is beginning to hit people it was never meant to because no adjustment for inflation has been taken into account.
Perhaps what we need is to classify goods into "basic" and "luxury" categories. Basic goods don't get taxed but luxury items got whopped.
The real problem however, is that the rich are fewer in number and don't spend as much on "goods" as the vast majority of workers in terms of percentage of total population. Most of their money goes into "investments" rather than "purchases." So, the idea of taxing "consumption" doesn't really do anything to except take more away from people who can least afford it.
In Europe exists sales tax called VAT (value-added tax). Sales tax is regressive form of taxation, it hurts especially poor people when food is taxed - like here on food here we have 7% VAT, and for rest of products and services there is 22%.
It's efficient - about 60% of all money collected by state comes from this indirect tax, so it's possible to abolish income taix. Anyway the one who told that sales tax is "fair tax" doesn't know what fairness is at all.
Income tax was created to redistribute money, create services and was one of the tools to create middle class. Sales tax is a nasty form of taxation, it also hits essential things like food (everybody can cut consumption of bubble gum, but bread and butter aren't in this category), on the other hand those who are bigger loosers are in the middle class, they consume almost as much as higher class (but their savings are a lot smaller) so they wouldn't afford that much. In my opinion it's another step to destroy middle class... and middle class is going to vote for that
When people are talking about 23% sales tax - it will include all goods and services, anyway someone should ask Huckabee about that - concept is well-known and practiced in Europe. Here it's everything, including prescripted drugs
Together with removing income tax will benefit only higher class. That's all, it has this effect. _________________ The poor complain; they always do,
But that's just idle chatter.
Our system brings rewards to all,
At least to all who matter.
Joined: Sep 04, 2005 Posts: 441 Location: central MA, USA
Posted: Sun Jan 06, 2008 6:25 pm Post subject: Re: 23% sales tax instead of income tax - thoughts?
Denny wrote:
Steve, I agree that a lot of stuff s not built to ever be repaired, but some can be. An example is my brother-in-law who discarded his VCR because it got jammed up, I picked it up and disassembled it to clean it out and cleaned the heads, etc., I don't think I spent more than an hour and 15 minutes. He found it easier somehow to part with $60 for a new one. Even if he did not have the tools, he could have spent about $6 at a dollar store and picked up what he needed. He just was not motivated. Maybe if he had to pay $80 for a new VCR he would be. I think too many people are lazy these days, they'd rather relax or socialize than get down to work.
No argument there. I guess I've run across too many junky bits of Chinese electronics and small appliances these days that when a part zaps out on it, the average person is SOL to get it fixed. I usually do what you do when something breaks; I figure I've got nothing to lose, and I open it up.
Sometimes I get lucky; I once had an electric razor that stopped working, and found that a tiny bit of internal plastic had snapped off and gotten wedged into the "vibrator". Removed the bit, and it worked fine for another 3-4 years.
But what the heck do you do when a toaster craps out after 6 months because the heating wires they use these days are apparently made of cat hair and silver paint? (My solution was to stop buying toasters.)
Quote:
I am not sure why you see clothing as that important, most of the clothing sold is redundant, it just replaces what folks already have due to style. And, if your are poor you can always shop at a St. Vincent de Paul or Salvatlon Army store. I can get by on just $400 a year for clothing, no problem, even using regular stores.
I'll bet I can beat you there because I dress like a slob, couldn't care less what's "fashionable", buy as much as I can from Salvation Army, wear clothes until the holes are appearing in visible places, and then wear them working around the house until I could get arrested being seen in public wearing them. Then, I cut them up as rags and use them until they're threads.
But I was thinking of shoes, and parents with small children who're growing up rapidly. I know, you can (we do, for our 3.5yo) shop cheaply. But I also know if I have to spend $50 or $100 on clothing, it's not a budget-buster. It is for some folks. Tacking on 23% would hurt. Food is a necessity, as is clothing.
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