Sales tax or income tax?

Henro · Jan 9, 2005

Rozett,

Look at it this way. Consider two people. One person makes $40K and another makes $100K, but both spend 30K of their income to live, on sales-taxable items.

For simplicity, say the sales tax on each $30K is $1,000 in tax.

If you do the math, the tax rate on the richer fellow is 1 percent, while the poorer fellow pays about 2.5 percent of his total income in sales tax. The net result is that those who have more pay less. If this is what one likes, fine.

Personally I would prefer all to pay equally, and perhaps progressively more as one becomes wealthier. But I certainly don’t like the idea of those with less paying relatively more than those who have more.

At least sales tax implies that one has some money to begin with. Property tax is even worse. It is a tax that sucks resources from many elderly, who do not have much to begin with, except their home and a small income stream. There are probably more elderly than we would like to know of, eating dog food rather than hamburger (forget even the thought of steak) out of fear of losing their homes, if they don’t shift a large portion of whatever income they have into the property-tax-collector’s hands.

At least sales tax is based on an individual’s wealth and/or ability to pay. Property tax is like having a lead weight tied to your belt when you fall out of the boat.

We all need to pay to run the government. We just don’t need those who have the least paying proportionally the most. Raising sales taxes or property taxes would just shift more of the burden onto those who can least afford it.

I realize I may be just one grain of sand on the beach, but that is how I see it anyway.

Junkman · Jan 9, 2005

One of the biggest problems of taxation is the portion of taxes that are used for educational purposes. This segment in some communities represents more than 90% of the towns budget. One problem is that the Federal government makes mandates that the states and towns must follow, but they don't have the extra funding available. An example is equal education, no matter what the child's ability to learn. Tens of thousands of dollars are spent every year by towns trying to educate children that have such a low IQ that no amount of educational instruction is going to ever make a difference. Instead of our system reaching out to the brightest children and giving them the best that we can offer, they are the ones that suffer, because the financial resources are not available, having all gone to the lesser students. I am not saying that these challenged children should be ignored, but rather they should be instructed in a way to make them productive citizens by teaching trades to them. In some instances it takes two educators to work with one child with negligible results at the end of the year. Not every child is destined to go onto college.

Junkman · Jan 9, 2005

( Rozett,

Look at it this way. Consider two people. One person makes $40K and another makes $100K, but both spend 30K of their income to live, on sales-taxable items.

For simplicity, say the sales tax on each $30K is $1,000 in tax.

If you do the math, the tax rate on the richer fellow is 1 percent, while the poorer fellow pays about 2.5 percent of his total income in sales tax. The net result is that those who have more pay less. If this is what one likes, fine.)

Your analogy is flawed in the fact that you want to consider what people earn and use that to change the tax tables. In most jurisdictions, "luxury" items are taxed, but necessities such as food, fuel, clothing, housing, etc. are not. A person making $30K is less likely to spend on "luxuries" and therefore would pay a lower tax. A 5% sales tax is equal no matter how much you earn because you all pay the same percentage on your purchases. Putting extra taxes on the wealthy just doesn't work. I believe that it was Jimmy Carter that introduced the Luxury Tax back in the 1970's. This added tax caused the wealthy to rebel by not making purchases of things such as boats as often. This lead to the luxury boat building business to collapse and a large percentage of them went out of business. As a result jobs were lost and the people that could least afford to be out of work were idle because of something called the "Luxury Tax". People with wealth spend that wealth more frequently. Put an extra tax on the spending and they stop spending and start saving. When the wealthy save, they put a lot of people out of work. It is the common man that works in the shipyards building ships, not the wealth man. The same can be said for every product produced. Wealth and spending create jobs and then everyone is benefited. Even communist China has learned this lesson and now allows private enterprise. This is the reason that China is growing at the rate that it is. People are now free to improve there lives and keep more of what they earn. They use the extra to purchase "luxuries" that they were denied in the past to enrich their lives today. This is why oil prices are on the rise, China is buying a larger percentage than ever before and there is a shortage for the rest of the world.

TWINKLE_TOES · Jan 9, 2005

Henro,
If you do the math, the tax rate on the richer fellow is 1 percent, while the poorer fellow pays about 2.5 percent of his total income in sales tax. The net result is that those who have more pay less. If this is what one likes, fine. /forums/images/graemlins/confused.gif

They both pay $1000

EastTexFrank · Jan 9, 2005

( I would prefer all to pay equally, and perhaps progressively more as one becomes wealthier )

Henro, that is essentially what a sales tax is and why your example is not correct. It assumes that both persons spend the exact same amount out of their income and, in the vast majority of cases that will not happen. It has always been my experience that people generally live "up" to their income, thus spending more and paying more taxes.

My main gripe about taxes is the number of times the government can tax the same earned dollar. They tax it when I earn it, they tax it when I spend it, they tax it when I invest it, they tax it when I die ... they even tax it when I give it away to family and friends. I know that is an oversimplification and that there will never be a equitable tax system, but I'd much prefer if they only taxed my earned dollar once and then left me alone to decide what I want to do with it.

BillyP · Jan 9, 2005

What I'd like to see is a flat rate income tax, say 10%. If you make a buck, pay your dime. If you make 10 million, pay your million.

It really doesn't matter though. If there's not enough money, which there never is, they'll make it up on something else. Look at Texas. there's no income tax but their property taxes are out the roof.

I just wonder when it'll all end. Will we ever see a 50-60-70% sales tax?

I have a good idea. We can outsource all the city, county, state and federal jobs to India or China /forums/images/graemlins/shocked.gif

Lazy · Jan 9, 2005

Hi
You hit the nail on the head, I agree 100%

Charlie.

khd · Jan 9, 2005

The problem lies in that government doesn't spend less as income declines. Or if they do spend less it is in essential services like education. When my income declines or the cost of goods increases I spend less on non-essentials. But then again I am essentially debt free and have a positive net worth.

Okay, I'll stop before I say something that'll shut the thread.

Regards,
Kevin

Junkman · Jan 9, 2005

Government always cut services where they will be the most noticeable, such as road maintenance, police & fire, education, etc. In industry, when bad times hit, the workers and management take pay cuts, politicians never cut their pay, but they do vote in pay increases even when there are lean times. Governments also get involved in areas that they don't belong, such as building sports stadiums. The teams can well afford to pay millions to one player, but they always want the city to pay for building them a new stadium to their specifications, and then they want to control all the concessions, proceeds, & revenue from the stadium. Sports should be like any other business. They should build there own facilities and pay taxes on those facilities just like any business. Just one more place that politicians have gone wrong and have given away tax dollars unnecessarily to an industry that doesn't need governmental support.

8561 · Jan 9, 2005

The property tax is a tough tax, and everyone has parents or grandparents (or did) who may have struggled in their declining years to pay the property tax. It really is an antiquated system. However, I know what I'm about to say is cruel and I will be flamed, at some point in one's declining years, you have to consider the possibility that living in the old family home is no longer feasable. Chances are the house is far to big, needs too much maintenance, not to mention the property tax. We'd all like to stay in the home we've lived in for years, but life doesn't always provide what we want.

I would also like to comment on the theory that the property tax is inequitable. That may have some threads of truth, but the real truth is we choose to live where we live. We could always (usually) live in or with less. The example of the two people making the same income but paying different tax amounts based on their property is a good thing, not a bad thing. You get to choose how much tax you pay. If you want a big new pole barn, go for it, you will pay. Same goes for an addition to the house, whatever. I built a new house two years ago. I knew within a few hundred dollars, estimated, what my property tax bill would be when I was done and made decisions accordingly.

Finally, I think the TBN family deserves to give itself a pat on the back, for the ability to discuss a topic that gets everyone's blood pressure up, so civilly, constructively, and politely.