Why wounldn't a consumption tax work?

Sales taxes are already here

 

Actually, indiciduals would be subject to a naitonal retail sales tax if that sale involves a party that is either another individual or a business. In Texas, it is required to collect sales tax if that item is subject to the sales tax. But Texas does not enfoce this procvision becasue the cost of compliance outweights the benefit of the tax received, generally.

I think people are understanding what final goods and services means. Service would include labor for services performed such as a dental checkup or a roofing repari. Today, you may pay a sales tax on the materials, but not the labor. A national Retail Sales Tax would tax both the materias ahd the labor. And if you hire your friends to do the job and pay them, then their services are taxed with you having to pay tsaid tax to the government.

And this means that evryone would now have to obtian a tax id number no matter which business entity they choose, if any.
yes, it is inflationary. On the one hand, prices will rise becasue the population now has more disposable income. Under the classic liberal supply-demand model, prices wold rise becasue businesses would be able to maximize profit on that increase.

 

I didn't consider a scenario where an individual hired a non-business entity to perform work, but I imagine those types of things would occasionally be untaxed as people would try to skirt the system just as they do today by paying cash to some people who do the work and have no record of it. But yes, to do it honestly would mean they'd have to pay the tax for the work they paid for so the person performing the work would be the one on the hook for collecting and submitting the tax, regardless how much work it took to set up that capability.

I don't think everyone would need a tax id number. Remember, a sales tax is paid by a consumer to whatever entity they are buying products or services from, so the responsibility is on the offering party to obtain taxation capability, not the consumer trying to find a handyman. If the consumer offers no services for hire, they have no need to be able to collect and pay taxes as a service provider or merchandiser.

Sure, prices would go up under the assumption a flat tax would free up money and people would have more disposable income, but keep in mind this nation is so heavy in household debt that it currently stifles demand, along with too few jobs, fewer worked hours, lesser benefits, rising healthcare costs and other things that hit disposable income negatively. We need to get disposable income up so we can fill the production capability void we have from capacity sitting idle and workers unemployed. That new competition for business and merchandise would spark the economy closer to full capacity before we would feel real effects of inflation, which is a burden the fed carries as part of their charter to control. They'd have to squeeze the money supply to slow down borrowing and growth if inflation go too high, but in our current condition it would almost be better to collect some sort of surplus to apply toward the national debt and assure no deficit spending occurs for some period of time into the future.

Edit: and if businesses capitalized on the price increases, some of that could possibly lead to jobs as demand grew in the economy, which is another plus for everyone as it decreases federal burdens on social programs and creates new taxation as those people consume more with their higher income levels.

 

1. What wash. Let me give you an example. Disposable income goes up, on average, about 20%. This means that peopel have 20% more income to spend. Thus, businesses will allow prices to rise so that profit would maximize. Taxes paid is simply a deduction and goes into the calculations of net profit while not having any effect on gross profit. Since prices rise, this becomes inflationary. And then wages rise as wel, but are also taxed for the services performed. So, wages will not go up as high as the prices and your purchasing power will now decrease becasue of the flat tax that is imposed. Thus, no wash.
2. In Texas, about 1/3 of all final goods are taxed. What is not taxed are purchases of new homes, certain car purcahses, medicine, products not having a business establsihment in the state of Texas, and a few others. In a national retail sales tax, all of that would be taxed, along with labor.
3 The point I was making is that if you have a person to person sale on a final goods or services, that product or service would be subject tottto the tax, but that person would simply not report the sale. This will cause a non compliance rate in said system. Not a good thing becasue the government wants its money no matter which system is used.
5. According to some studies that include proposing the NRST, rates have generally been around 23%, 17% if you do not include a rebate of any kind. NC{A did a study in 2007 and suggested a rrate of 50% if basic necessities were exempted from the tax and a rebate was used. This is under the presumption to pay for current expenses in 2007 BTW.
6. When the government is sending those checks, it is based on the income reported on the tax return, fi they filed. the point is that the government does their rebates or forms of credit either on the return or after a return is filed. In Contrast, the rebate would be based on income the current year or the prior year. since there is no income tax return to determine what rebate to send.
7. i am assuming you agree or do not know what an information return is. A W2 or a 10999 iare two examples of a information return. Information returns would come in the form of tapes, thorugh the point of sales machines. Individuals would be based on an estimate determined by an analyst.
8. Yes and no. I take it you never been through a sales tax audit. If the state determines you are either inappropately programming the point of sales machine not to collect taxes or that the state determines you do more business than you report, there is no explanation and those penalties and interest would be charged. This in turn will have an effect on complaince because people would now deem the system to be unfair if there was reasonable casue.
9. the point of the NRST is to get rid of the IRS and to starve the government not to enforce the laws on the books. Bad policy.
10. You may want to thnk on this. Let's say you purchased an NFL jersey with your favorit player. The jersey costs $100. Local and state retails sales tax is 8.25%. So now the cost is $108.25 under current law. But if we add a NRST tax of 23%, the shirt will not cost $131.25. This is now double taxed. In addition, with incomes of the middle and loer class being taxed at a higher rate for services that they used iinfrequently on some and regularly on others, then you are casuing an economc strain on the lower and middle income classes to fund for projects that everyone uses. Those that do not spend, or have the luxury not to spend, will be able to use said services with the minimal amount of payment for the maximum gain. And that would further cause a disparity in the income lines and start a class war that wold affect everyone. Again, not a good thing.

 

Well if You look at so-called sin taxes you will note that we have different taxes on beer wine stronger alcoholic drinks. I simply don't believe the pols could resist setting different tax rates on whatever seem to offer the most political bang for a buck tax increase or decrease. I mean look at our current tax code thousands upon thousands of pages written almost entirely to micromanage behavior...

 

You want to add another tax? Don't we have enough taxes already? Can a consumption tax be written so Democrats and politicians don't have to pay?

 

no sense?

it depends on what your objective is

I believe that everybody must pay some tax.

I do not subscribe to the concept of not paying any tax

A consumption tax is one of the most fair and easily managed solutions compared to income tax

 

Were talking about a tax overhaul, and I'm saying that investments should be taxed on returns. The kind of consumption tax that would be needed would be around 20% - to levy that on the purchase of stocks would hurt the economy AND reduce revenue from taxes on stocks. It's just a silly class warfare scheme.

 

Nope not another tax. I want to use the current tax code to start my fireplace for the next decade and put a new one in it's place.

 

it's not an illusion, the cost of living overall is raised

for some people having all income tax removed cancels out the additional expense of the consumption tax, but not for the people on the very bottom, as is they are already not paying income tax. So they experience the raised cost of living without experiencing any benefits from the income tax removal

 

Why would you need 20% if you also included stock purchases? The tax would be via the brokerage firm. We already tax on returns at either 5% or 15% capital gains tax, but never on all the sales.

 

Sounds good ! In the system you propose I wouldn't have to pay for the park system that I never use , I wouldn't have to pay for the school system that I no longer use ,or the library system or the fire and police and roads I don't drive on . The systems would fall apart because 90 % of the people wouldn't be paying for the services mentioned above because they don't use them.

 

I don't think you read what I said.

 

You would still pay for all those things each time you purchase something. Not using them doesn't mean not paying for them.

 

so if i buy a stock lets say 5000 shares of facebook today you say i have to pay taxes on that sale?...10 %?..thats 35,000 dollars?..who would buy stocks?..no one...economy would collapse...

 

So they wouldn't pay tax on the sale of shares at roughly $370,000 for the shares, $37,000 for the tax, but they'd buy a Bugati or Lamborghini for hundreds of thousands, pay the tax, plus pay the luxury tax, insurance costs, etc.? I think you're making unsubstantiated claims when you say nobody would buy stocks. Wealthy investors have no choice but invest their surplus funds in some way, or let it sit under a giant mattress or spread across bank accounts earning nothing, and common folks but at a more leisurely pace due to funding limitations so the tax wouldn't be as shocking as a large purchase. But either way, everyone would pay it so the investment vehicles would still be needed for a method for people to earn money on their investments.

If they implemented a sales tax on homes would you avoid buying one? In all cases would people avoid buying a home if it were taxed that way? We may adjust how much we spend so we can afford the taxes but I would imagine people would still need homes and rentals are only available in finite numbers. We've been acclimated to stocks having no sales or purchase costs aside from brokerage fees for decades, but there's no reason we don't tax them besides those who buy and sell them don't want them taxed. What could justify protecting an asset from taxation where other purchased assets require it? You pay the tax on your cars you buy, why not your stocks, bonds, CD's, etc.?

 

little people buy stocks too..have a 401k plan?...put more thought into it...no one would buy stocks..companies would be broke in a month..close shop...and many people would be living in the streets...and dont buy a house...tax that too...

 

Of course I buy stocks. I wouldn't be against the tax. Keep in mind, you'd have zero taxes withheld for federal income tax any longer. That money would be back in your wallet. So if you buy stocks on your own, as I do, plus a 401k, as I do too, then you would pay taxes on them. Not a big deal if you're buying a solid investment. Sure, it'd suck if you traded too quickly because you'd never recoup your trading costs (tax plus brokerage fee), but why would it stop people from buying? I just don't get your rationale. You would buy what you could afford in terms of houses, stocks, food, etc, just as you do today, but within a different tax construct. Budgeting is not a big deal and people wouldn't be homeless over sales tax on a house. They may buy one a bit cheaper so they could afford the tax, but why would they be homeless? Just to avoid a sales tax?

 

do the math and you will see why it is a dumb idea...when herman cain had his sales tax idea and people did the math they saw that they were going to be taxed a lot more than they were already and he was done for...

 

My guess would be that since 70+ percent of the GDP is consumer spending a tax that emphasizes the cost of unnecessary purchases might be disastrous to the economy.

 

I don't know what the details of his plan were, but if people are heavily taxed more than before, something is wrong. Inclusion of investment asset taxation would help decrease tax on other items, bringing the overall needed sales tax rate downward for everyone. I wonder if his idea didn't include taxes on everything.

 

his idea was tax everything..but sales on stocks and bonds...but housing, food, gas, cars new and used and so on...people need to out more thought into ideas like this people they make ideas ....

 

People buy a lot more stuff than they "have" to buy so revenue could be sporadic. I am not opposed to them BTW. The problem is not so much how we raise the revenue as it is the inability to not spend far more than we take in for political gains.

 

Taxcutter says:
Exemptions, exemptions, exemptions. Pretty soon you have what we have with income taxation. A byzantine tax code that nobody understands and half the people avoiding taxation altogether.

Socrates had democracy pegged 2,500 years ago.