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Mon 15 Jan, 2007 07:09 am
This is a tangential idea carried over from another thread. :wink:
Okay, first draft of our new Sales/Death Tax Plan for the United States
Operating under the assumption that Americans hold about 50 trillion dollars in privately held wealth, spend about 10 trillion annually and collect about 50 billion in Excise Taxes (guestimates arrived at by trying to find real numbers and averaging what I came up with), I've put together the following conclusions
just for fun
so no vitriol please. I'm sure there is plenty of error and I'm looking forward to learning where
because it looks too good to be true to me, too.
Individual, Corporate and Employment taxes all get replaced by simple, all inclusive Sales Tax, encouraged by a stiff Estate Tax.
50% Death Tax, no exceptions. Should provide about $250 Billion annually
but look at Gift Taxes..
25% Gift Tax, no exceptions
Variable, depending on who wants to avoid Death Taxes, but quicker moves means more Sales Taxes as well, which should cover the difference.
20% Sales Tax, no exceptions. End users, everything included; but no tax cascading.
1.5% kicked back evenly among citizens of all ages (equates to $1,000 annually, today)
For easy numbers; I'm estimating 120 million house holds for my examples (2.5 persons per?)
Average spent per person $33,333=$6,666 taxed per person
Average spent per household $83,333=$16,666 taxed per household.
Approximate kickback per household: $2,500
In essence, first $12,500 spent is untaxed to average household ($20,000 for a family of 4).
More progressive version (I thought this would be fatal, but the calculations actually intrigue me.):
End all welfare programs with-
25% Sales Tax, 6% kickback per person (4 person cap per household) = ($4,000 annually per person)
Here, the break even point for an individual is $16,000. He'll pay no tax until he spends more than that. At $32,000 he's still in reality only paying 12.5%. It isn't until the other side of $66,666 that the 6% kick back system starts to hurt him. Roughly double the average spent per citizen of the U.S.
Here, every family of 4 (or more) actually receives $16,000 annually, whether they work or not. Average household (2.5 persons) receives $10,000 and breaks even on taxes until they spend $40,000
($30,000 of their earned dough.) Keep in mind, we're essentially talking about 80 cent dollars here, so it's not as wonderful as it may seem to poor people.
What about the rich guy? Let's say a guy spends $200,000 per year (you know who you are). He's still only paying 23% once you account for his kickback (he's doing worse than that now). How about $1,000,000? 24.6% (He's doing much worse than that now
or should be if the system isn't too corrupt).
At the end of the day; with either strategy we're looking at about a 19% effective median Sales Tax rate. Easy to just not spend the extra dough you say? Then you get whacked with a 50% Death Tax. A stagnant Estate will be reduced by 50% every 20 years or so. On the other hand, since it costs nothing to earn money, it shouldn't be too difficult to maintain an Estate if you keep your money working. About a 3.5% (plus inflation) annual gain on holdings would enable a dynasty like the Kennedy's to maintain their Estate permanently. Considering their income would now be untaxed, this should be a walk in the park. Works the same way for the local farmer or Pizza man who want's to pass his business on to his kids. He need only plan appropriately for his demise.
Whatcha think?
I'm not an American, and I'm not an economist, but I like it. Has a certain elegance. Anything that simplifies the system is good. If it becomes a win/win situation -- well, even better.
(I think that some island nations of the South Pacific operate this way. The rationale is that collecting income tax from a semi-illiterate fisherman on a remote outer island would be costly, if not impossible. However, that fisherman does comes to town every so often, for supplies, rope, a little fun ...)
Bill- Just took a quick look, but one thing sticks out..................the death tax. I think that is patently unfair. If a person has had the wherewithal to accumulate money in his life time (he had paid taxes on those earnings), the death tax is a double taxation. It think that it creates a disincentive to save and invest, but that is a secondary issue.
I think that the sales tax is going in the right direction. You get taxed on what you buy, so to some extent, what you pay in taxes is under your control.
I really don't have the head to think this through right now (I just lost my mom, and am on A2K to keep from becoming morose), but I WILL be back!
Phoenix32890 wrote: Bill- Just took a quick look, but one thing sticks out..................the death tax. I think that is patently unfair. If a person has had the wherewithal to accumulate money in his life time (he had paid taxes on those earnings), the death tax is a double taxation. It think that it creates a disincentive to save and invest, but that is a secondary issue.
Under a Sales Tax System; he wouldn't have paid Tax on his holdings. Further, a death Tax is the simplest way to encourage spending. You'll notice gifting costs him less in Cash, and buying gifts even less than that. Stagnant money held for generations accumulates value with NO Tax being assessed. If we can get the money moving, our economy will soar. A stiff Death Tax accomplishes that.
Phoenix32890 wrote: I think that the sales tax is going in the right direction. You get taxed on what you buy, so to some extent, what you pay in taxes is under your control.
Precisely. The system rewards savings for those who need it, and punishes hording for those who don't.
Phoenix32890 wrote:I really don't have the head to think this through right now (I just lost my mom, and am on A2K to keep from becoming morose), but I WILL be back![/color][/b]
Sorry to hear about your mom... (((((((((Phoenix)))))))))
Only one problem I can see, Bill.
You gotta stop calling it a "kickback." Call it a rebate, a refund, whatever... It's an election year, for God's sake.
It's a first draft, darlin. Prolly have to revert back to Inheritance Tax over the Death Tax too, before we go to print... or maybe the new fancy fangled version; "the Paris Hilton Tax". :wink:
OCCOM BILL wrote:Prolly have to revert back to Inheritance Tax over the Death Tax too
That would be the honest way to go about it too. "Death tax" is a slick, new-fangled propaganda label, that's been stuck on the inheritance tax by tax opponents for maximum effect.
It is the inheritor who pays the tax, the tax is paid over the inheritance - ergo, inheritance tax. "Death tax" is less descriptive (to put it mildly), as its not death itself that you pay tax over (if you have no inheritance, you dont pay tax either, die as you might).
The coining of the term "death tax" by the anti-tax fundamentalists has been pure "polsploitation", as in: trying to get the most mileage out of your rhetorics by maximising its racy, inflammatory sound, rather than trying to describe the political matter at hand in the most objective way.
You're not much one for the whole language analysis thing in politics, O'Bill, so you're just gonna reject this as more "back flipping", but seriously, without folks like you even noticing whats going on, its this kind of **** that spinners from left and right poison reasonable political debate with.
nimh wrote:You're not much one for the whole language analysis thing in politics, O'Bill, so you're just gonna reject this as more "back flipping", but seriously, without folks like you even noticing whats going on, its this kind of **** that spinners from left and right poison reasonable political debate with.
Nimh, I would have thought it obvious that I was acutely aware of where the Death Tax moniker came from after mentioning the corresponding Paris Hilton version. My use of it to begin with was only to beat the whiners to it, as I've always considered the Inheritance Tax a necessary tool in modest redistribution. Any thoughts on the actual plan?
No deep thoughts right now, Bill. If something like your plan is implemented, I am going to go into business. Have you ever seen those bumper stickers, "I'm spending my kids' inheritance"? I will sell oodles of those, and make a bundle!
Re: Sales Tax replaces Income Tax! You heard it here first!
OCCOM BILL wrote:50% Death Tax, no exceptions. Should provide about $250 Billion annually
but look at Gift Taxes..
25% Gift Tax, no exceptions
Variable, depending on who wants to avoid Death Taxes, but quicker moves means more Sales Taxes as well, which should cover the difference.
If this were implemented, the corresponding "estate planning" loopholes should be eliminated at the same time. If someone wants to give their child (or whomever) a "gift" they can do so while they are alive. They shouldn't, IMO, have the ability to hide their money in some bogus account that hands the money over to the inheritor as a "gift" after they've died to avoid the higher estate tax rate.
We're of the same mind on that Fishin. No exceptions means NO exceptions. Downside is; the massive exemptions disappear as well.
Re: Sales Tax replaces Income Tax! You heard it here first!
OCCOM BILL wrote:Whatcha think?
I love it, especially the more progressive one. I must admit, though, that in my opinion it has a snowball's chance in hell to succeed politically. It's going to be especially tough in the Senate, where most seats are held by rural states beggaring the more urban states for agricultural subsidies. Your proposal will never fly with them, at least not in the short run.
But hey, I probably would have had similar comments in 1900 about suffrage for women, 1950 about civil rights for blacks, or 1980 about gay rights. As a statement about the 2027 tax regime to shoot for, I like your suggestion a lot!
Eva wrote:Only one problem I can see, Bill.
You gotta stop calling it a "kickback." Call it a rebate, a refund, whatever... It's an election year, for God's sake.
Eva, when and if I should ever need a branding consultant, you're hired.
Everything I've ever read indicates that income taxes are illegal, as are asset taxes. I think sales tax as a replacement for them is a fine idea. The problem becomes how to track sales and barter. Many would choose bartering over sales to avoid paying any taxes.
I haven't looked closely at the numbers yet Bill.
The first thing that comes to mind is when inheritance tax kicks in. Most people have small estates that often consists of their house and a small investment. How about putting that inheritance tax at where it roughly has been, at $2-4 million. It really won't affect the tax reciepts a whole lot since most of the wealth is in the hands of those with estates of that size or larger.
I believe the inheritance tax is on the size of the estate. Not on the amount given to each person from that estate. I will have to confirm that.
If I may interrup this thread. Please drop by and wish our Phoenix condolences:
http://www.able2know.com/forums/viewtopic.php?t=90133&highlight=
Re: Sales Tax replaces Income Tax! You heard it here first!
Thomas wrote:OCCOM BILL wrote:Whatcha think?
I love it, especially the more progressive one. I must admit, though, that in my opinion it has a snowball's chance in hell to succeed politically. It's going to be especially tough in the Senate, where most seats are held by rural states beggaring the more urban states for agricultural subsidies. Your proposal will never fly with them, at least not in the short run.
But hey, I probably would have had similar comments in 1900 about suffrage for women, 1950 about civil rights for blacks, or 1980 about gay rights. As a statement about the 2027 tax regime to shoot for, I like your suggestion a lot!
Well now I'm excited! I would have thought you would be able to poke lots of holes in the basic premise. While not as effective in terms of being aggressive for money movement; compromises on Death Taxes could easily be worked in. For example; Farming could simply be deemed exempt to a certain level as too important of an industry to disrupt. Who'd argue? Alternately; there is room to play with an overall exemption since each percentage point of the Sales Tax by today's economy represents about $100 Billion and the total of anticipated Death Tax receipts is only $250 Billion (figured at 1/2 of 1% of total privately held wealth). On the Progressive Version (my favorite too, actually), nothing was adjusted for the savings in Welfare, either. Upon further thought, I can't really see a lot of harm in a reasonable exemption; will we suddenly lose our greedy desire to have the newer car or the newest gadget? Probably not.
It seems to me the numbers work to provide plenty of assistance to the poor, without human error, favoritism/ or bureaucratic waste... all without overburdening the middle class or rich. I can hardly even imagine operating a business unburdened by Income or Payroll Taxes. Talk about growth potential?
Also notice the system is 100% based on percentages
on purpose. I recently realized the $600 personal exemption on Income Taxes was meant to shield the poor from the Tax
a condition that rapidly eroded to dissolution with inflation. Any exemption on Death Taxes should be hinged accordingly. Perhaps; amounts over 5 times the average Net Worth of all Citizens (10 time for Farms)(approximately $800,000 and $1.6 million in today's money) How tough would
that be to sell? Most Joe's die with under $100,000 and Minorities average way less, so the popular vote should be easy to get. Sell it as Income Tax Freedom, Free money for the poor, and we're sticking it to the rich guy! Though, IMO, the Rich guy benefits as much as everyone else
if he's still productive. Only the stagnant holders of wealth get punished
and Paris Hilton.
Gotta be as simple as possible. I mean, three-page simple.
You're also going to run up against a hell of a lot of resistance from the tax-preparation businesses...
Good idea tho
Cycloptichorn
OK, i was in the middle of something else, so here's why i consider this a stupid idea.
First of all, you are not going to be able to replace current revenues immediately with a sales tax--so even if you did get one passed, never mind an intelligent and sane bill to cover all the necessary contingencies so that it is not regressive, you would have to have it tandem with income tax, in the beginning, because otherwise, the revenue short-fall would shut down government. In practical terms, you can bet that any revenue which the government gets (and that includes the boys and girls in Congress), they are going to keep. The odds are very good that the income tax would never truly go away. It would have to be maintained at least until the death tax kicked in to make up the revenue short-fall, and i doubt that a death tax could do that, unless it were nearly 100% confiscatory.
One of the reasons the tax code is a byzantine nightmare is because of all the exceptions and deductions which are available. Even those with the most altruistic motives can be exploited. Members of Congress routinely add "invisible" riders to bills which exempt the pet projects of their constituents from taxation, and the necessary regulation to prevent the sales and the death taxes from being either regressive or confiscatory would be subject to the same Congressional chicanery.
For all the flaws of the income tax, i doubt that the government could ever do without it. Not the government we have today, which not only provides social welfare (a relative bargain, it costs less than operating the Federal prisons), it provides corporate welfare either with direct or indirect subsidies, or through tax code manipulation which favors certain industries. The income tax could not be dispensed with overnight, and the potential for abuse of a concurrent income and sales tax would be too great, and so would the temptation for Congress to take advantage.
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