Not to mention that we would not need the IRS any longer which would save a ton. We would just have to think of an option for homes, cars, boats, etc...
Seems to have bailed Russia out and we can't keep doing what we are doing and expecting it to get any better right? Simply crazy to me that the tax system we have now gets mishandled the way that it does. This could also fund no cost hospitals the way Brazil has. You can have insurance and go to the state of the art hospitals or walk into a free county hospital.
To swap income tax for sales tax makes more sense. This could also help fix our illegal alien problem. I only have a problem with illegal aliens because they use government programs and our education system but they don't pay taxes. I think the House should swap immigration reform for a flat federal sales tax because anytime something is sold, tax will be paid no matter who you are. So in essence everyone is paying taxes, not just the 1% or just the 99%, ALL 100% will pay according to what they use. I would much rather have all 1625 of my paycheck every 2 weeks and determine how I will spend it than the 1087 I get because of income taxes and medicare taxes and social security taxes which I will never see. At least with a flat sales tax I am not being promised something there is no way my generation will ever see.
This is a great idea and we should push for it. We would then be able to tax the 60 billion dollar a year drug trade. That drug dealer that buys a luxury boat or car would then be taxed. This would generate a big stimulus to our economy. We would have less need for the tax attorneys, the huge IRS department (whose budget this year is 13.3 billion dollars) and CPA's to do these tax returns.
This would be a win - win for all of us, rich or poor.
A national sales tax would fall evenly on all citizens regardless of their income. No matter who purchased, for instance, a washing machine, they would have the same tax placed on the purchase price; there would be no level of differing taxes based on income. For this to be truly equitable there must be no exemptions for luxury goods, such as yachts, to shield the rich.
With the current tax bills and medical insurance going sky high since Obamacare, the only way to equally share the pain is through a Federal Sales Tax. Not on staple foods, clothing, except Luxury items. Hit everyone the same way. Lower incomes who buy more food and basic clothing will not be hit as hard as the ones buying Vineyards and G6's. How much odes the Goverment pay the IRS in salaries to harass middle income Americans? Why not just turn the IRS into tha sales tax collecting agency and get rid of a tax program that has turned the 1040 into a lesson in Astro-Physics and Nuclear Reactor Engineering?
I live in Texas where there is no state income tax. However, we have one the highest sales tax rates in the nation. Our sales tax works as our income tax and everyone is subject to except when purchasing food or services such as plumbing. I feel the same will work for the rest of the country!!! This will not hurt the poor, it will ensure that wether you are buying a ford fiesta or a Maserati you will be paying your "fair" share!!!
I see a lot of people saying it would hurt the poor but it's simple math. If a low income person spends 100% of their check, say $600 and are taxed 10% that's $660 dollars. If a rich person spends 10% of their check, $600 dollars and are taxed 10% that's $660 dollars. The rich just have 90% they can't spend if they don't want to be taxed. The tax remains the same dollar for dollar. It doesn't affect the poor as much as the rich. More spent money, more taxes paid. Less spent money, less taxes paid. The poor WOULD NOT have more of a burden.
There are a lot of "rich" people out there that blow 1000's a day on crap only to turn around and claim it back in deductions. With a sales tax these 1000's in spent money would turn into 100's in tax income.
For the middle and lower class it would mean keeping more of your check to start, let you save money back, and move up the chain. The only safe gaurds that would need to be put in place is "passing the buck" which a lot of companies currently do. Raise the price of items to make up for the tax they have to pay. The IRS wouldn't be able to be closed, it would just get smaller and keep an eye on big businesses to make sure they aren't trying to take advantage of the consumer by trying to pass on the tax as a "cost of living increase".
So as per my W2 and my tax return I am left paying 15.3% total in federal tax. So if every person and business pays exactly the same then it's a simple done deal. And I do mean everyone, every time. Disney just bought Lucas for four billion plus. Place the same 15% sales tax on that. Bam! It would absolutely fix everything.
Provide an incentive for saving and investing while taxing consumption. Also decrease the tremendous cost of tax compliance for millions of Americans as well as corporations every year. I'm an accountant and realize that thousands of CPAs would have to find new work if tax were to be simplified to this point. In reality though, they are smart individuals who can help a business grow and should not be troubled for finding jobs. The overall increase in savings & investing leads to smart spending which drives the up tax revenues and produces a more active economy. Reduce government limitations and entitlements but increase education and public communication so that we have a voting population who is knowledgeable and driven on the issues. Our bi-partisan system has failed as both sides are deceptive.
Those with more income generally buy more any way, and generally buy more expensive items.
Food, medical, housing (to an extent), clothing (to an extent), should not be taxed. Those are the necessities of life.
If a person of greater wealth wants to buy "bling", they pay more in taxes. Those who are on a lower budge pay less.
No income tax, but tax on what is purchased.
In listening to the discussion, it struck me that a retail tax on goods and services, but no sales tax on wholesale or to make product - i.e. no Corporate or business would be paying any tax, would shift the burden to people. The high income earners will form businesses to shelter purchases from the 23% sales tax proposed. The rest of us, without money to manipulate purchases through shell companies will foot 100% of what previously was collected from businesses and Elitists (as well as middle income earners).
Retail sales occur when businesses sell goods or services to households. Business-to-business transactions are not retail sales because the purchase is used as an input, not as household consumption. Household-to-household sales of goods or services are not included, either, since tax should have already been paid when the good was originally sold to a household from a business. For example, the sale of a newly constructed home to a family that will occupy it is a retail sale. But the sale of that same newly constructed home to a business that is planning on renting it to others is not a retail sale. Nor is a sale of an already existing home from one occupant to another.
Measuring the sales tax rate would seem to be a simple problem. Suppose a good costs $100 and there is a $30 sales tax placed on the item. Most people would probably consider that to be a 30 percent sales tax, since the tax is 30 percent of the selling price. This is known as the tax-exclusive tax rate. An alternative would divide the $30 tax payment by the total cost to the consumer ($100+$30), making it a 23 percent rate. This is known as the tax-inclusive tax rate. Sales taxes are typically quoted as tax-exclusive rates. Income tax rates, however, are typically quoted as tax-inclusive rates. For example, a household that earns $130 and pays $30 in taxes would normally think of itself as facing about a 23 percent (30/130) income tax rate.
Although there is no one true method of reporting the rate, it is crucial to understand which approach is being used, since the tax-inclusive rate will always be lower than the tax-exclusive rate and the difference grows as the rates rise. At a rate of 1 percent the difference is negligible, but a 50 percent tax-exclusive rate corresponds to a 33 percent tax-inclusive rate.
Both the Schaefer-Tauzin (S-T) and the Americans for Fair Taxation (AFT) plans would attempt to tax all goods or services purchased or used in the United States. Exemptions would be provided for business purchases for resales, purchases to produce taxable property or services, and exports. Expenditure on education would be exempted on the grounds that it is an investment. The sale of newly constructed single-family homes would be taxed, as would improvements to existing single-family houses. Already existing owner-occupied housing would be exempted. All financial intermediation services would be taxed. The tax would exempt expenditures abroad by U.S. residents and half of foreign travel, but tax domestic expenditures by non-residents. Notably, the proposals would tax all federal, state, and local government consumption items, as well as government investment in equipment and structures.
Although it seems like a great idea at first glance if you take the time to think about it, it is not as equitable as you think and could destabilize the US economy and places the financial burden on the middle class and poor. Most arguments say that it makes everyone pay their fair share but it doesn't really. They say it will eliminate tax shelters for the rich and businesses but it doesn't. In fact it has the potential to destroy the US economy. Even if necessities are untaxed which isn't guaranteed the rich would just buy in other countries to save 23%. Foreign investors in US companies would look for investments elsewhere where they can save an instant 23%. High dollar luxury purchases suddenly move overseas. Why would anyone want to pay 23% every time they made a stock purchase. Most investors would look to invest overseas or use foreign banks and brokerage firms to avoid paying sales tax. The tourist industry would suffer. My dollar is now worth 23% more if I go to Canada, Mexico or Europe. The only people that wouldn't be able to afford that is the poor or lower middle class. If there was no IRS or income tax than most likely you would have to pay sales tax on housing, food, medication and other things that were tax free. A 15% flat tax would be more fair. With a Flat Tax you could still eliminate the IRS and filing taxes, loop holes, etc. With Fair tax you are just creating easier loop holes and ways to avoid paying taxes. I could go on. This is just me thinking about it for an hour or so. Flat tax not Fair Tax!
Unless all basic necessities are tax free, any consumption tax will affect those who have less more then the wealthy ones. This will cause the poor to have even less to spend, which will increase their need for additional assistance, or the spiral into abject poverty. Consumption taxes do not bring in more revenue and are a ruse used by the rich to relieve themselves of the burden of providing for those they exploit for profit.
Elderly living on social security alone and disabled vets would now have their living expenses increased. VA benefits and social security were not taxed with the income tax. This would be devastating. Food stamps would have to be increased. More people may become homeless. Guess maybe an 80 year old woman could get a job so she could pay her "fair share".
People must pay their bills and put food on the table, so they must earn an income. The purchase of a particular product, or any beyond the necessities, is contingent on numerous individual factors, such as financial stability, disposable income, and current obligations. Additionally, the calculation of Gross Domestic Product involves the analysis of governmental income based upon verifiable and stable sources of tax revenue, whereas the proposed system would shift government income to a system that is unpredictable at best and mathematically chaotic at worst. Imagine experiencing stock market declines on the governmental level such that nations begin to rise and fall according to market trends. That would be the result of this move. Furthermore, the combination of income and sales taxes would introduce the same element of unpredictability while also straining the open market by causing immediate false inflation. The only viable application I can think of for this idea is the introduction of federal sales taxes on cheap, high-traffic products such as alcohol and cigarettes, treated as windfall profits for government, and used to soften budget deficits in an intentionally unanticipated manner such that fiscal year outcomes become perpetually better than expected.
Everyone (rich and poor) needs to buy things like food, clothes, utilities and these expenses often take up the majority of poorer peoples income. If they are paying the same tax levels on these as those who earn a lot more money, their percentage of tax paid is going to be much higher than those on higher incomes which is unfair. Income taxes also have their problems but ideally under this system those in poverty should pay less tax and is thus a more equitable system.
I live in a state where there is no income tax, but we pay a 9.25% sales tax on everything we buy. The problem with sales tax is that the people who can least afford to pay it have to carry the burden of it. Those who are able to pay the extra, might not seem bothered by it. I can understand the temptation to use a sales tax, especially on unessential items. But, when you buy $100 dollars worth of groceries, then have to pay an extra $9.25 on top of that, it will bust your budget if you have a limited income. Now, suddenly, you are out of the $10 you needed to buy diapers for the kids. This is the kind of regressiveness that a sales tax can cause.
A sales tax appears to be equal across the board. It is not, however, due to the fact that there is a certain amount of things that are necessities that everybody must purchase. If the income tax is abolished, lower income people will pay a greater percentage of their income in tax than higher income people, simply because lower income people spend a greater percentage of their income than higher income people do.
In theory, a federal income tax might seem fair, because people with more money would pay more taxes if they spend more money. However, people have many basic needs, and there are a lot of people who can't afford to pay more spend more than they already are. People with a lot of money would have a choice of not paying more tax by not buying unnecessary items, while low income people who only spend on basic needs would not have the choice.