Why wounldn't a consumption tax work?

Same style of thread like the Flat Tax one.

Why wouldn't a consumption tax work for the federal government. It would be based off of new products that people buy. "People" being US citizens, Illegals, out of country tourists......everyone. Anything purchased for a company...taxed.

Economist I am not (which is one reason I'm starting this thread), but it sounds very easy to me and very hard to get out of because everyone has to buy stuff.

 

I think we already have those. They are called sin taxes, as well as nanny state taxes.

 

Those do exist, but according to what I've found they are a small scale. Nothing that truly supports anything right now, just adds to.

 

There's also sales taxes.

 

Because they need taxes to be progressive to support the massive state they've constructed. 35% of GDP doesn't steal itself.

 

Sin Tax, Nanny State tax, Sales tax

So what you all are say is that they already exist and work great so lets do it at a federal level and do away with the federal tax code as it exists today?

The current tax system we have is a pile of (use appropriate expletive here). Any system that would allow a major corporation that is considered a "person" that can donate any amount to a political campaign, but not have to pay taxes is messed up. http://abcnews.go.com/Politics/general-electric-paid-federal-taxes-2010/story?id=13224558

Not like I could say "sorry I'm not paying taxes with year....ok?" "Oh, and here's 100K for my favorite political party"

 

because it is regressive

say we remove all income tax and replace it with a federal sales tax, basically what happens is the cost of living goes up.. now you can argue that people aren't having to income tax anymore, but as is the people with bottom incomes are already not paying any income tax, so basically their cost of living goes up on top of receiving 0 benefits from the income tax being removed. They are made worse off from the new tax system

 

would we have a consumption tax on services too?

for instance, if the rich rent their things, would they be taxed, would leased items be taxed, cell phone plans, cable plans, snickers candy bars, ect....


.

 

Yes, if you want your house cleaned you are charged a consumption tax. If the you go out for the weekend and party you pay tax or if you stay home and buy nothing you pay no tax.

I think you're giving the general populace to much credit. Yes it will cost more to go out for an evening, but the amount of money on their paycheck will go up by a good sum. I think in the long run what people see will have more impact than what people "have" to see. Besides, lets say people pay attention more than I'm giving them credit for and get scared of spending. It can only last so long, because everyone needs stuff.

 

Except their paycheck won't be bigger because the people at the lowest income levels aren't paying any income tax now. So you've just shifted the tax burden toward the people least able to pay it.

 

I'm all for using a flat, no-exemption consumption tax to completely replace the income-based taxation in place today.

"Regressive" and "progressive" are terms completely irrelevant to taxation. Differential tax rate are merely mechanisms for redistribution of income and as such are morally wrong.

A national sales tax and elimination of income taxation would much simpler and would allow us to drastically reduce the size and power of the politicized IRS.

A sales tax with no exemptions would bve supremely transparent as compared to the current byzantine income taxation scheme.

A flat no-exemptions sales tax would disabuse people of the evil notion that government runs on other people's money.

 

So long as you include the consumption (purchase and sale) of commodities, stocks, bonds, etc., then I'd say it would work wonderfully and even the wealthiest would be taxed on their full "consumption" since so much is parked in investments that currently go untaxed as far as sales/purchase. They only pay capital gains on value increases under current guidelines so sales tax on those instruments would stuff the coffers and I can't think of a valid reason to exempt them from any taxation considering how quickly and often they change hands.

 

Taxcutter says:
I'm A-OK with that.

 

Ok, so in order to keep the IRS somewhat employed lets say anyone that earns below X amount gets a check in the mail every week/month for what the estimated taxes they would incur for that time period. Not much different than the estimate check people get now from the government.

 

interesting, how so?

let's not even discuss the proposed rate because you get there via numbers

first, you cut most of the irs and tax courts

then, you trim fed, local and state govt as much as possible

let those people bask in the Dreaded Private Sector for a while

then, you exempt rent/mortgage and foods (perishables)

everything else, taxed

you don't need internet
you don't need a cell phone
you don't need cable tv

those are lifestyle choices

add up your costs
review consumption from prior years, carry the 3, take away the 7 and there you go, you come up with the % needed to cover the costs

by making all of your pay "take-home-pay", and then having to hand over what you already have, that makes people much more aware of the cost of govt and think twice before voting Democrat ever again

 

Somewhat of an empty complaint, given that the rich will still still pay more, and that there is apparently little concern over tobacco and alcohol taxes, or lottery taxes (which are the heaviest kinds of taxes and DO target the poor), but even so such a system could easily be modified. Give everyone a 10k allowance per head with the negative tax system and suddenly such a criticism of a flat consumption tax is empty.

 

Interesting. I hadn't thought of that. I'd suggest that instead a tax on investments should be levied against the return by piece. Otherwise that'd be so prohibitive it'd discourage investment, which doesn't just benefit "fat cats".

 

They're already taxed on gains when they sell those investments, or did you mean something else by the term return by piece? I may have misunderstood.

 

A national retails sales tax would not work for the following reasons:
1. It is inflationary. Prices will go up since disposable inomce would go up.
2. Not all itmes currently are taxed using this method, but would not. This would also include big ticket items such as homes and cars taht are exempt under state law.
3. People will not become resopnsible for sending sales tax reciepts into the ogvernment
3. The rate would range from 23% to over 50% depedning on how many exemptions would be allowed such as meat, bread, cheese, and mild, for instance.
5. This tax is regressive.
6. It gets complicated when you have to deal with that rebate to make the tax less regressive.
7. there will be more information returns
8. Sales tax audits have no loopholes, generally, as compared to income tax.
9. It won't get rid of the IRS or allow accountants to lose their jobs.
10. States will not be more restricted on how to raise money with the sales tax option off the table. This means iether increased property taxes, state income tax, or increased fees on everything.
11. It may look good on paper, but in reality, it won't work given the reasons listed above.

 

For Pete's sake, people!

You just can't get away from your exemptions and carve-outs. That defeats the entire purpose.

Every exemption or rebate clouds over transparency. People still get to think government runs on other people's money. Taxpayers (now consumption taxpayers) get screwed and moochers get still get subsidized. How is that any improvement over the current system?

 

How would someone use an exemption from a consumption tax? You pay when you buy, whether goods, services, investments, etc. And yes, the taxpayer gets screwed while the moochers mooch. No different than today, except ALL would be taxpayers based on their consumption, and there would be no caps, no exemption for investments or other methods of hiding money (except savings/checking accounts I suppose, but that's not a purchase).

 

Your post makes no sense. Please explain how replacing income tax with a consumption tax will not increase the tax burden for people who currently pay no income tax.

 

If there are going to be exemptions, allowances, estimates, etc... how is a consumption tax going to be any different than the messed up income tax system we have now?

 

Of course it's inflationary in that it fluctuates with prices. So does your sales tax you pay today on goods in your state, assuming you have sales tax in your state. Tax rates can be set by type of commodity or whatever, or it could be set at a flat rate and every item subject to the same tax. Obviously the rate itself would be critical, but it's possible it could be very low considering covering every purchase by individuals and businesses. The tax would not be regressive if every purchase were taxed equally, from a piece of gum to billions in stocks, tax them the same. No exemptions means we all contribute based on what we spend, and even what we invest. It's only regressive if some people end up paying more than those in higher income brackets, but if you add in investments there's no escape unless you park money in a bank account that earns next to nothing.

Individuals wouldn't need tax receipts. Businesses would. People would pay tax to stores, gas stations, investment firms, etc., upon purchase, so people and businesses that sell anything would be the conduit to paying the taxes. No need for IRS audits on people, but surely on stores and other entities to keep them honest. Much easier to manage when it's x% of sales. States could still tack on their own sales tax right on top and adjust accordingly. They do this already today.

 

1. Correct, so why won't it be a wash? It will make the tax an option for the people and the people will immediately see the money involved. If you don't want to pay taxes, don't buy anything.
2. Ok
3. The people wouldn't it would be the stores and states like they do it now in most local areas anyway.
3. My personal opinion is that those items wouldn't be exempt.
5. How so?
6. Again, how so. Right now the government sends out checks based upon parameters established by rules that someone decided a kid was worth. (Welfare)
7.
8. That's kind of the point here.
9. Not wanting to get rid of IRS, but trim.
10. Again, not an economist here but how does the Federal Sales tax effect a State Sales tax?