Sales tax or income tax?

[rozett]

In the Buying/Pricing/Comparisons forum, Henro wrote the following in the Taxes thread...

</font><font color="blue" class="small">( Then again, if I made the rules there would be no sales tax to begin with, sales tax being one of the most unfair taxes...my tax system would be based on income...not spending. )</font>

Henro, I disagree....although I like to think of a sales tax as a consumption tax. I acknowledge that we need a "progressive" tax so that those that have more are taxed at a higher rate. But I think it is better that those that spend more, pay more.

It would be pretty easy to set up a sales tax system that exempts a core set of necessities like food, some clothing, medical expenses, and heating fuel.... so that lower income folks have their basic needs available without paying a sales tax. Other than that, all goods sold or services delivered are taxed at the point of sale.

Much of the current tax collection structures in the federal and state budgets could all but be eliminated by adding a few cents to the consumption tax for the federal budget. For instance, the FY05 budget for the IRS is $10.674 billion. It would save companies millions of dollars in collecting and reporting income. All of the POS software already has capability for sales tax, so there is little startup problems. And todays tax structure is just loaded with loopholes and intricacies around taxing income. This would all be eliminated.

This would also encourage savings.

 

[8561]

I really hate the idea of a progressive tax. Why would anyone purposely create a disincentive to success? If you worker harder, longer, smarter, you are rewarded with your compensation for doing so being confiscated? I think not.

At least with a sales tax, you have some control over the amount of tax you choose to pay. In effect, it becomes progressive under the theory that those who have more consume more.

Of course, I live in a state without any sales or income tax, so I often get a chuckle out of these discussions. In NH, revenue is largely generated based on the property tax. Politicians in NH who propose otherwise are basically committing political suicide here, although there is a tremendous amount of debate about school funding and the perceived inequities in education between towns. What a mess, with no decent solution.

 

[JDgreen227]

"In NH, revenue is largely generated based on the property tax"....

Property taxes have always been something I hate...although Michigan has not used property taxes on your homestead to pay school operating expenses for over ten years now. What irks me is that property taxes are basically just another form of income tax...let's say I own a huge house on 30 acres and the man next door owns a mobile home on a tiny lot that barely has enough room to park his beater pickup on.

Now, which one of us two homeowners is going to end up paying more in property taxes?? Am I going to get more and better local services such as police and fire protection, or is the county road commision going to maintain the street in front of my 30 acres better than the street in front of the trailer next door?

Suppose I decide to build a huge pole barn, which requires paying for the permit and numerous inspections, and after the final inspection the local tax assessor decides I have to pay more property tax...now, am I going to get anything in return for the extra dollars I contribute to the local township treasury? I think not.

Talk about progressive taxing--to me, property taxes in general are one of the biggest swindles ever foisted off onto the middle class.

/forums/images/graemlins/mad.gif /forums/images/graemlins/frown.gif /forums/images/graemlins/mad.gif

 

[5030]

I agree, but Jennifer don't. Speaking of proverty taxes, they are due by the 14th of February. /forums/images/graemlins/grin.gif

 

[rozett]

Tim, I feel the same way about progressive income taxes. That's why I got interested in the idea of consumption tax. I discovered that some of the more ardent progressive tax folks are really interested in wealth redistribution. That thought is appalling. The Bolsheviks tried that and learned that the leaders always feel like they deserve more. Just like in our democracy. /forums/images/graemlins/grin.gif

 

[Junkman]

I would comment, but the forums don't allow political commentary. Given that, I don't know how anyone can intelligently discuss this without getting into the politics of taxation. After all, it is politicians that enact the tax laws and it is the same politicians that spend the tax dollars. No matter what the system, the only way that we will ever see a equitable tax program is if one group is independent of the other. The group that raises taxes doesn't have control over the group that determines how the taxes are spent. Total autonomy is what it would take, but no politician would ever go for that, since the power to raise taxes and spend the money is the greatest power a politician can have.

 

[khd]

The problem with shifting tax from income to consumption is that when the economy runs sluggish spending usually decreases decreasing tax collected. When that occurs the government usually starts cutting services or increases some other tax to make up for it. Not an advocate of either, just pointing out the circle created.

Kevin

 

[MikePA]

<font color="blue"> I would comment, but the forums don't allow political commentary. </font>
Civil discussion about the alternative methods for governments to raise funds is fine.

Problems arise, and threads get closed, because these types of threads usually attract the anti-government, nutball, black helicopter crowd who can not keep from ad hominem attacks against politicians or the government in general. Present company excluded, of course. /forums/images/graemlins/grin.gif

 

[rozett]

It is hard to keep the politics out of it, but they way I see it the politics is mostly on the spending side. And I agree, that we must separate those that approve spending vs. those that approve raising the revenue (taxing). But separating them won't work until we have a mandatory balanced budget.

With a consumption (sales) tax, it would be pretty easy to separate the spenders from the raisers, by making any increase in tax rate require a public referendum. If the legislature wants to spend more money, they would have to go to the people and make the case and get them to vote for it. Our income tax code is just much too complicated to allow referendum votes on it.

 

[rozett]

</font><font color="blue" class="small">( The problem with shifting tax from income to consumption is that when the economy runs sluggish spending usually decreases decreasing tax collected. When that occurs the government usually starts cutting services or increases some other tax to make up for it. )</font>

Kevin, I see no problem with that. When the economy turns down, the government should spend less. Why should they be any different than the rest of us.... trying to make ends meet.