The Instigator
Kescarte_DeJudica
Con (against)
Winning
9 Points
The Contender
lyokowarri0r
Pro (for)
Losing
0 Points

Income tax (pro) or sales tax (con)?

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Post Voting Period
The voting period for this debate has ended.
after 3 votes the winner is...
Kescarte_DeJudica
Voting Style: Open Point System: 7 Point
Started: 5/19/2016 Category: Politics
Updated: 1 year ago Status: Post Voting Period
Viewed: 513 times Debate No: 91520
Debate Rounds (5)
Comments (0)
Votes (3)

 

Kescarte_DeJudica

Con

In this debate, I will attempt to argue and prove that the federal government should switch from an income tax to a sales tax. My opponent will be taking the side that the government should keep an income tax, whether it be sticking with the current progressive, bracketed system, or switching to a flat tax.

Definitions:

Sales tax- a tax the government charges on the sale of items.
Income tax- a tax the government charges on the recipient of income

Rules:

1. No trolling (bringing up irrelevant points, making snide remarks, etc.)
2. No forfeits. Anyone who forfeits a round automatically loses the debate, and all seven points to be awarded there of.

I will be supporting the Fair Tax Act of 2005 in my debate, which is probably the best well known piece of sales tax legislation. It abolishes all federal income taxes, Social
Security and Medicare taxes, estate tax, gift tax, and corporate taxes. It also provides a rebate each month, so that it is not regressive. You can read about it at the link below:

https://fairtax.org...
lyokowarri0r

Pro

Seems like 1st round is acceptance. I understand the rules. Hoping for a good debate. I do not support the Fair Tax and support income tax. Good luck
Debate Round No. 1
Kescarte_DeJudica

Con

Thank you Pro for accepting the debate. I will present my argument for why I believe that a sales tax plan, in this case the Fair tax, is the better option, as compared to it's income tax counterpart.

I believe I will take some time to explain the Fair Tax in a bit more detail before going over why it would be beneficial to switch over to this sort of tax plan. The Fair Tax replaces all the taxes I mentioned in the first round with a one-time, national, retail sales tax of 23%. This would be administrated by the state governments. It applies to all goods and services sold, with the exception of college tuition. It also provides a prebate so that no one must pay taxes on the necessities of life. All that being said, I will now make my argument as to why this is the better tax system.

First of all, the sales tax encourages greater participation in the work force. Anyone who gets a job now gets to keep 100% of their paycheck. They are then free to spend that money as they please. They don't have taxes deducted from their check, and they never have to fill out tax forms to send to the government (accept for the prebate, more on that later). This will produce greater participation in the work force because people now don't have the prospect of paying more of their money in taxes, and the illusion that they're wasting their time working only to hand their hard-money over to the government, hanging over their heads. The same applies to corporations. Corporations who have fled offshore to escape tax payments will now relocate back to America, because we will have become the most business-friendly nation in the world. This would mean that more companies set up here, providing all sorts of economic boosts, such as an additional market for the labor force.

In addition, the Fair tax act would encourage people and companies who have stashed money offshore to move it back into the United States. Why? Because they would no longer have to worry about it being taxed so heavily, and because there is no more motivation for tax-evasion. More money being stored in our banks means that there is more available for lending, thus causing the interest rates on borrowing to drop. This also has unmeasured economic benefits.

Another point is that of Social Security and Medicare. As most of us have heard, these programs are facing a funding shortfall. More money is being paid out then is being paid into the programs, a seriously troublesome problem that needs to be fixed. What does this have to do with the Fair Tax? Plenty! Probably the best way to solve this problem other than cutting benefits is to expand the base of revenue for the programs. The Fair Tax does this because out of all the money that comes from the tax, a certain portion will be used to fund the programs. And unlike the current system, where there is a cap on Social Security contributions, the Fair Tax system effectively removes this cap, creating additional funding. If that doesn't solve the problem, I don't know what will!

And here's one of the best parts. Currently, there are billions of dollars that go untaxed in the "underground economy", or roughly 13% of the GDP (see the link below). The underground economy consists of all the illegal economic activities that where money is not reported for tax purposes, such as drug trafficking, prostitution houses, etc. But it can also include otherwise legal activities where the money is not reported as well (such as the plumber who gets paid in cash. Do you think he'll report that to the government?). The Fair Tax Act finally taxes the underground economy where the income tax fails to do so. After all, criminals still like to eat in restaurants and go to the doctor when they're sick as much as anyone else. And the moment they do, they're paying taxes like everyone else.

And let's not forget the tourists! Remember, they'll be paying taxes too whenever they buy something, which again helps fund things like defense, Social Security and Medicare. Doesn't it give you a nice feeling deep inside to know that visitors from other countries will help to pay for your retirement programs.

However, there is one flaw with a sales tax system. Critics would argue that under the proposed system, the poor will be hit too hard with the tax rate, and will be paying a much greater share of their income in taxes as compared to the rich. Thus, they conclude, a sales tax system is regressive. Well, they might be right with other systems, but not with the Fair Tax. Enter the Fair Tax prebate.

Under an income tax, like the one we have, people at all income levels are allowed to take a deduction for dependants, including themselves. This is to insure that people are not taxed on the money it takes to live off of, and so that they only have to pay taxes on everything earned above that. This insures that the poor are not burdened too heavily as opposed to the rich. Well, the Fair Tax had a similar system in place. What is set up under this piece of legislation is what we call the prebate. How it works is we take the number that the Federal Poverty Standard puts on the maximum amount of income anyone can earn and still be in poverty, and we multiply this number by 23%. We then divide the number by twelve and pay that out each month to everyone as prebate, to cover the taxes that people will pay in that month. For example, let's say the Federal Poverty Standard for a husband, wife, and two children is $40,000 a year. This means that if they earn anything below this, they are considered in poverty. So what we do for this particular family is multiply $40,000 by 23%, which gives us $9,200. We then divide that number by 12, which gives us $766.67 a month. This is the amount of money that the family in the above example gets each month, to cover the taxes they are paying that month for necessity items. Only when they choose to buy something above this will they start to pay taxes.

And remember, this prebate is not just for the poor. Everyone gets it, just like everyone gets the dependant allowance, regardless of income. Whether you're rich or poor, under the Fair Tax Act, no one will have to pay taxes on their necessary living expenses. Only when you buy something beyond this, will you have to start paying taxes. So you see, the Fair Tax system really is progressive, because the rich will pay a much greater share of taxes then the poor. In fact, many poor people will be getting a free ride!

I have two final points. The first is, the Fair Tax is a one-time tax on retail purchases. That means, things will only be taxed one time, when they're bought brand new in a store. Used items will not be taxed, which means that yard sales and thrift stores will not be required to collect taxes. The second point is that the Fair Tax encourages economic growth like never before. People will no longer have the added disincentive to not work and earn more, and companies will no longer have the disincentive to not expand their operations or to move out of the country. And their board members no longer would have to take into consideration the tax implications of a business decision. Although this probably wouldn't happen overnight, the eventual economic benefits would be inestimable!

In conclusion, I would like to say that for these reasons, and for many others I haven't even touched upon, the Fair Tax system is superior to it's income tax counterpart. It gives us the opportunity to lead the world to a better form of taxation. Fair taxation. I look forward to hearing my opponent's argument!
lyokowarri0r

Pro

Now it the con side has not given an outline for the debate format so I will just take this round to rebuttal. As I see it, most of the burden of proof lies with the con side if not all of it.

I would first like to point out the political impossibility of such a policy to pass. Such a plan would need to repeal the 16th amendment(income tax) which is doubtful that that many supports would exist in Congress and in states. If that is the case, it is a question why to debate it at all. Why argue for something that will not occur. This policy would be blocked at every turn.

The con side has failed to bring up any sources to support his claims that this policy would work. My main concern is revenue. I have doubts that a tax system on just sales tax will bring equal amount as our current system and would increase the deficit or force lower spending at the expense of the lower class.

Despite what the con side has said, the lower and middle class people of America would feel the brunt of the tax burden for the country. Proponents of the fair tax say this is a progressive tax, which means that the wealthy pay more and the poor and middle class pay less as a percentage of their income. This expectation will only come true, however, if individuals spend 100% of their incomes on taxable expenditures. Taxpayers " especially wealthier citizens " are not likely to choose to live paycheck-to-paycheck. Also, the increase money gained from eliminating the income tax will only be taxed by this...100% of it rather than a fraction under a income tax system. The prebate program might help with this but this would be the widest reaching welfare program in American history and would not be able to be covered by this program. Worse yet, the prebate check system will not include non-citizens, significantly raising the cost of living, especially for lower-income immigrants, permanent residence ("green") cardholders, and visa holders. It could also deter highly educated foreign workers with great careers, such as doctors, engineers, and technology sector workers, from immigrating.

Such a high sales tax rate would undoubtedly lead many to evade the tax, people would look overseas to buy items.

Under this proposal, the obvious way to lower your tax burden would be to spend less money. Low spending is not good for any capitalist economy. While many current tax incentives are specifically created to drive consumer spending, the large sales tax could discourage consumers from spending freely, thus hurting the economy. Plus, since many wealthy individuals already invest on their own and in other businesses, they may be further motivated to do so. Those moves could benefit the economy overall, but since these activities would be non-taxable, the national burden shifts to the lower economic classes.

There will also be a loss of deductions from this policy. Many people derive significant benefit from common personal tax deductions, such as the home mortgage interest deduction, the child and dependent care credit, education credits and deductions, and the earned income tax credit " not to mention the ability to deduct medical bills and expenses and student loan interest. The cost of home ownership, then, could significantly rise for homeowners who currently itemize and have large interest payments. Renting would become even more appealing, and an already ailing real estate market could be devastated.

Though federal income tax would go away, state income tax would remain, and of course it would no longer be deductible against federal taxes. The effect would be a great burden on residents of high income tax states like California. Moreover, unless you live in a sales tax free state, like Oregon or New Hampshire, you could pay your state"s sales tax on top of the Fair Tax and on top of your state"s income tax. For a family living in Los Angeles making $100,000, this would be well over 40%.

With all of these holes with the Fair Tax, I do not see how this can be any good to the economy. It seems to me a bug tax break for the rich, while taxing the poor more. The system in place can be reformed but it is not bad enough for a change as big and improbable as this one.
Debate Round No. 2
Kescarte_DeJudica

Con

Thank you Pro, for posting your argument. You are right when you say that I did not give an outline for a debate format. I figured that way we won't feel quite so restricted in making our arguments.

I will proceed to offer a rebuttal to the arguments you made in the previous round, starting with the argument concerning the Second Amendment.

"I would first like to point out the political impossibility of such a policy to pass. Such a plan would need to repeal the 16th amendment(income tax) which is doubtful that that many supports would exist in Congress and in states. If that is the case, it is a question why to debate it at all. Why argue for something that will not occur. This policy would be blocked at every turn."

My opponent is correct when he states that it would be a dubious, if not impossible, effort to attempt to repeal the 16th amendment. But he is mistaken when he claims that it would have to repealed to implement the Fair Tax. H.R. 25, the bill for the Fair Tax in the House of Representatives, may not repeal the 16 amendment, but it does repeal Subchapters A, B, C, and H of the 1986 IRS code. This is the very language of law that implements the collection of income tax. The 16th amendment authorizes the collection of an income tax, but it is not a requirement to have an income tax. It only gives Congress the option of implementing one. The law that dictates the collection of an income tax is the part of the law that is repealed when the Fair Tax Act is passed. Therefore, why must 16th amendment be repealed?

"The con side has failed to bring up any sources to support his claims that this policy would work. My main concern is revenue. I have doubts that a tax system on just sales tax will bring equal amount as our current system and would increase the deficit or force lower spending at the expense of the lower class."

Well, it's rather difficult to bring up sources to support the claim that the Fair Tax system will work. After all, it hasn't ever really been done before anywhere. I suppose I could pull up a few economist reports on the subject, but you could probably pull several as well, that state: "This won't work, because..." However, you doubt that a system running off revenues from just a sales tax could support all of federal enterprise. The closest thing I've ever seen to implementation of the Fair Tax would be in the state of Nevada. It is the currently only state in the Union with absolutely no state income tax of any kind. And although it is not the only tax they implement, the bulk of their revenue comes from sales taxes. They don't offer a prebate, but they exempt most food items, clothing and prescription drugs from the tax. The state rate 6.85%, with local municipalities charging up to 1.25% , for the maximum rate of 8.1%. But Nevada certainly doesn't have any real revenue issues, in spite of the fact that a lot of the countryside in that state is desert. California, on the other hand, has income tax rates of up to 13.30% for individuals, without a standard deduction or a deduction for dependents. California also has an income tax, again with exemptions for items like food and medicine. But the state rate for sales tax is 7.5%, with municipalities charging up to 2.5%, for a maximum rate of 10%. Yet, with all this revenue coming in, California has got some really bad revenue problems, with the state getting in trouble with creditors on more than one occasion. So, it isn't so much a matter of revenue (although the Fair Tax rate of 23% is designed to be revenue-neutral), as it is a matter of fiscal responsibility. And this can be done without increasing the deficit or lowering spending in a manner that would hurt the lower class.

"Despite what the con side has said, the lower and middle class people of America would feel the brunt of the tax burden for the country. Proponents of the fair tax say this is a progressive tax, which means that the wealthy pay more and the poor and middle class pay less as a percentage of their income. This expectation will only come true, however, if individuals spend 100% of their incomes on taxable expenditures. Taxpayers " especially wealthier citizens " are not likely to choose to live paycheck-to-paycheck. Also, the increase money gained from eliminating the income tax will only be taxed by this...100% of it rather than a fraction under a income tax system. The prebate program might help with this but this would be the widest reaching welfare program in American history and would not be able to be covered by this program. Worse yet, the prebate check system will not include non-citizens, significantly raising the cost of living, especially for lower-income immigrants, permanent residence ("green") cardholders, and visa holders. It could also deter highly educated foreign workers with great careers, such as doctors, engineers, and technology sector workers, from immigrating."

It's true that rich people are less likely to spend 100% of their income and live "paycheck-to-paycheck" as Pro says. In fact, rich people invest a much larger percentage of their income in investments, and donate a larger share of their money to charity than the poor and middle class. But regardless, rich people still like to buy nice things for themselves. After all, what's the point of having all that money if one doesn't spend it? The rich like to buy limos and mink sofas and caviar just as anyone might. And every time they do, they pay a 23% income tax just like everyone else. But their living necessities are tax-free, because of the prebate. Just like everyone else.

As for the matter of the prebate being a welfare program, I hardly see it as a welfare program. It's more of a tax credit. When someone has their income taxes withheld from their paycheck, and they have too much withheld, they file a tax return and get a refund of the overpayment. This is a rebate, and it isn't welfare because you're refunding someone their own money, not someone else' money. The prebate is like that. It's simply refunding an overpayment of sales tax to the payer. Again, I don't see how that is a welfare program.

The Fair Tax system can certainly afford the prebate. You know how I know? Because the current system in place can afford their dependent exemption. The prebate is only the sales tax version of the dependent exemption.

As for the argument that non-citizens will not receive the prebate, this is also incorrect. To be employed in the United States, whether you are a citizen or the holder of a visa, green card, etc., you need a Social Security Number. Under the
fair Tax Act, the requirements for receiving the prebate is to fill out a form listing the names of all the dependents in your household, plus their SSNs. There is no requirement for citizenship.

"Such a high sales tax rate would undoubtedly lead many to evade the tax, people would look overseas to buy items."

The fact of the matter is, no matter what sort of tax system we have in place, there will always be those who attempt to cheat. But under the Fair Tax, it takes two parties to cheat. Those who are not collecting the tax, and those who buying the untaxed items. This is opposed to the income tax, where only one party is not reporting all the tax.

"Under this proposal, the obvious way to lower your tax burden would be to spend less money. Low spending is not good for any capitalist economy. While many current tax incentives are specifically created to drive consumer spending, the large sales tax could discourage consumers from spending freely, thus hurting the economy. Plus, since many wealthy individuals already invest on their own and in other businesses, they may be further motivated to do so. Those moves could benefit the economy overall, but since these activities would be non-taxable, the national burden shifts to the lower economic classes."

Contrary to popular opinion, spending more is not better for the economy. Because with economics, there are micro-economics and macro-economics. A micro-economy is essentially your own personal, financial affairs and a macro-economy is all the micro-economies put together, so to speak. Think about it. When has it ever been good for you personally spend more? If you were given the choice between two products of the same value, and one was cheaper than the other, wouldn't you take the cheaper option? Of course you would. This is basic thriftiness. More money saved in one area means more money for a different one. The only reason people spend is because they want to buy things. If everyone had everything they needed, then there would be little spending, but everyone would still prosper. The purpose of a capitalist economy is to provide an abundant supply of high quality products as a low price. If this is not occuring, then something in the system is not functioning properly. That said, the Fair Tax will discourage buying in as much as it will motivate people to be more thrifty with their money, which is certainly good for the economy, because a lot of additional waste will be cut out as a result. And as for the matter of non-taxable business investments, who says these actions won't create tax revenue? Businesses in expansion often need to buy additional equipment and other business essentials. When they do, they pay 23% in sales taxes.

Do to the character limitation, I am afraid I will not be able to finish my rebuttal in this round. This is a pity, for I very much desired to tackle my opponent's argument about speciality deductions, such as those for mortgage interest and medical bills. But I will simply do so on my next turn, in addition to anything else which comes up. I look forward to the hearing the opposing argument for Round 3!

Sources:
http://www.tax-rates.org...
http://www.tax-rates.org...
http://www.tax-rates.org...
lyokowarri0r

Pro

I am deeply sorry. I really do not want to forfeit but because of personal reasons, I cannot continue this debate. I will forfeit this round and all other rounds. Again, I am sorry.
Debate Round No. 3
Kescarte_DeJudica

Con

Thank you Pro, for so graciously alerting me to the fact that you can not continue the debate. I am sorry that it has to end here, as you were a very skilled opponent, but I do understand.

Ladies and Gentlemen, this concludes the debate: Income tax (pro) or sales tax (con)? Thank you for taking the time to read and vote on our debate, and thank you DDO for hosting the debate.
lyokowarri0r

Pro

lyokowarri0r forfeited this round.
Debate Round No. 4
Kescarte_DeJudica

Con

(No arguments will be posted in this round)
lyokowarri0r

Pro

lyokowarri0r forfeited this round.
Debate Round No. 5
No comments have been posted on this debate.
3 votes have been placed for this debate. Showing 1 through 3 records.
Vote Placed by fire_wings 1 year ago
fire_wings
Kescarte_DeJudicalyokowarri0rTied
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Total points awarded:10 
Reasons for voting decision: ffety ff
Vote Placed by 16kadams 1 year ago
16kadams
Kescarte_DeJudicalyokowarri0rTied
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Total points awarded:10 
Reasons for voting decision: FF
Vote Placed by princearchitect 1 year ago
princearchitect
Kescarte_DeJudicalyokowarri0rTied
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Total points awarded:70 
Reasons for voting decision: Con wins this debate because Pro forfeits rounds. But I would have given Pro, the who do I agree with before the debate. But the rule #2 states, "2. No forfeits. Anyone who forfeits a round automatically loses the debate, and all seven points to be awarded there of. Therefore, all 7 points to Con for Pro's forfeit. But I want to commend Pro for being graceful.