@realjohnboy,
realjohnboy wrote:
okie wrote:
As an alternative, instead of the current income tax system, I favor the Fair Tax, or a national retail sales tax, for a number of reasons.
Hi, Okie. The National Sale Tax idea has been floated for a number of years but never gets much traction, despite these "facts" (based on some out of date data I found):
1) We could eliminate most of the IRS (115,000 employees & an $11B budget)
2) Some, we can argue about how many, people cheat on their income tax returns. With the NST they would be taxed when they spend the money.
3) The underground economy-i.e. money moving from one person to another that is unreported, is estimated at $1.4 Trillion a year. I, I mean not me, pay a kid to mow the lawn.
4) The U.S. gets lots of tourists. The NST would be good as long as they kept coming.
The perfunctary research I have done seems to suggest that the National Sales Tax would need to be around 23-27%. That is going to be a tough sell.
What, if any would be exclusions? Basic food? Twinkies?
Congress loves the tax code because they can hide stuff. Did you know left-handed turnip farmers in LA get a break? Okay, I made that up.
rjb, no tax is perfect, and the sales tax would have its downside. But here are the positive aspects that I love.
1. It would eliminate the IRS as we know it, except to administer the Social Security and Medicare system, and we would have to make sure this function is totally divorced from the taxes, two different bureaucracies. And I only favor the sales tax if and only if all income tax is eliminated. The mechanism for collection is easy, as we already collect state and local sales taxes, virtually everywhere in this country. Merchants collect the tax. And although nonpayment of taxes by some merchants might be a problem, the magnitude of the problem would not be nearly as much as keeping track of 300 million people. For example, if Walmart failed to file, or if their system tried to hide taxes, it would be immediately obvious. Full time tax auditors could be assigned to watch the biggest retailers.
2. This second point, I think is potentially the biggest one. It places all products sold in this country on equal footing, without regard to where they are manufactured, so no more need to quibble over tariffs and that sort of thing to the same extent. This factor alone would provide a huge boost to the fairness of a level playing field in this country, possibly giving manufacturing here a big shot in the arm.
3. All illegals, drug dealers, and other people avoiding income tax for a myriad of reasons, would pay tax. Tourists pay tax. Everybody pays tax that lives here or visits here, that buy stuff.
4. This requires more study, but my initial thoughts include some progressivity could be injected by no tax certain basic necessities of life, food, housing, and medical care. Starting with groceries, this is already done in some states, and because of barcoding, this works pretty smoothly, so everybody can buy basic food without tax. Restaurant food should be taxed. Also, housing, another basic staple, tax could be excluded to a threshold, so that rich people pay tax on mansions over a certain amount, or rent over a certain amount, but everybody pays no tax up to a certain level. The vast majority of modest housing would be excluded. The other staples, clothing, I think tax because used clothing at lower prices is freely available. Medical care, no tax. Everything else tax, and since rich people buy more stuff and more expensive stuff, the rich still pay most of the tax.
5. It has also been proposed that the working poor could receive a rebate, and this could be done through the payroll / Social Security / Medicare system, but this is only available to working citizens that earn wages, much like some of the credits are given now.
6. It appears this could become somewhat complicated, and it probably can, however, I do not think it would ever become as complicated or as difficult to administer as the current income tax code, which virtually requires a truck to transport.
7. One concern, the black market of trading is a possibility, but in this society of mass produced goods, I don't see that as a huge potential problem, at least not surpassing the current problem of the large numbers not paying now.
8. Last point, some argue the cost will rise, however, because no business will pay income tax, nor will citizens pay income tax, the cost of goods before taxing should drop some - and people will have more money in their pockets to buy stuff. And one beauty of the system is that everybody sees the tax they pay when they buy. The government would not like this, and I think this is one reason the tax has not been considered seriously so far. Congress simply likes the power too much to be able to engineer our behavior with the tax system.
At least, Congess should give this taxing system a very serious look, and a very serious debate, with the best analysts giving their best information available. I admit that this opinion is preliminary, based upon my reading, and it could change based upon further information, but I think it deserves more serious consideration than given so far.
