1% tax on all goods and services, exempting determined basic needs. This tax would added to current irs and state sales taxes. Costs on everything seems to always go up, so how do we pay for them? We either pay a little more or get a little less, just ,for example, coffee. Fact of life is you can't get what you want and need for last years price. Research the expected tax revenue and adjust federal spending to eliminate or at least substantially lower our cost over-runs. I know this seems a little simple, but I favor the kiss principle. Plus it seems this could happen fairly quickly ,if the congress would consider the best interests of the majority of the people in the us instead of their own self interests. (getting reelected ,getting wealthy, and making their party happy with them).
I believe a federal sales tax would be more equitable than the current federal income tax as long as it is not an additional tax. A federal sales tax would effect people equally throughout income levels because the more you purchase the more you pay, which means if you don't make a lot of money and don't purchase items you would pay less, likewise the more goods you buy the more tax you pay. I also agree that a flat federal sales tax would work fine as long as the current federal income tax is abolished.
Capitalism is driven by consumerism. The "American" way of life is based on buying things. We are told to work hard so we can buy the so-called finer things in life. In this day in age, Americans, in general, are driven by greed and over consumption, to always have the newest and best things in life. I don't think a federal sales tax could lose in this country unless it is brought into action while the federal income tax is still active. You have to do away with the income tax in order for the federal sales tax to be beneficial. You can't raise the prices of everything while continuing to take money out of paychecks, it just won't work.
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.
All too often, higher income earners and business enterprises pay less tax than rank-and-file workers. A national sales tax, as a form of consumption tax, would tax every one equally across the board, and people who spend more would pay more taxes.
Those who have undocumented income would be required to pay taxes on their purchases, which would prevent them from avoiding federal taxes.
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?
This tax would also hit those purchashing items with illegal untaxed income such as gambling, drugs, working under the table, etc. The poor already pay a federal sales tax on gas, liquor, and tobacco products. Who uses more of those products, the rich or the poor? Are we defining POOR as anyone not having a cell phone? 47% of Americans pay no federal income tax. Guess the rest of us are rich and should support this overwhelming minority.
When income is taxed, it always ends up with the rich people being taxed at a much higher rate than poorer people. The poor people then start to feel entitled to other people's wealth. If everyone is taxed based upon a fixed sales tax rate, then no one group of people can band together to take other people's money.
Presently, 47 percent of Americans do not pay any income tax, at all. That kind of percentage of citizens not contributing is not healthy for our society. It can be argued that if everyone had to pay a federal sales tax, then everyone would be more involved in making sure the federal government does not waste the tax payers' money.
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.