Why do we need a progressive tax system?

[atlkvb]

This discussion ended abruptly in another thread but to me it's the heart over what type of Government we both need and can afford? It also answers the most fundamental question of how big do we want the Government to be?

In order to answer this question, we need to understand what is meant by a "progressive" tax system?

excerpt from pdf forum

"Progressive taxation is purported to serve three primary social objectives: The first and most commonly agreed objective is to redistribute the burden of government taxation from those of lesser means to those more affluent. The second and least publicly acknowledged objective is to provide government with the power to redistribute income from the “wealthy” to the “poor.” The third objective, which also played an important role in the original public support for progressive taxation was the contention of intellectuals that the economic and political power of wealth required curtailment"

Full discussion in link:

What is income redistribution?
http://www.ipi.org/docLib/PR162-Hartman-Redistribution.pdf-OpenElement.pdf


So based on a synopsis of the linked article, we have a progressive tax system to redistribute incomes from wealthier folks away from poorer folks to fund needed Government social services AND curtail political or economic power of the wealthy?

Who's on board for this?

In conclusion:
"Given that increasing the share of taxes paid by the wealthy does not increase the after-tax income of the remainder of incomes, then serious re-examination of public policy is necessary. We are paying a high price for high marginal tax rates that limit domestic capital formation and income growth, but where are the offsetting benefits? What are the real costs incurred by punishing the productive and subsidizing the unproductive? What unwholesome behavioral and demographic trends are being promoted? Is the most perverse consequence an increased tax wedge on physical and intellectual capital whose cost is primarily borne by workers and consumers through lost jobs, lower incomes and higher prices?"

The real income effect of high marginal taxation is lowered real income after tax for all Americans".

 

[EEResistable]

Progressive taxes are immoral.

 

[atlkvb]

Progressive taxes are immoral.

It is the ultimate control mechanism over free people because the progressive rates are totally arbitrary based on how much "sacrifice" they think you need to make on money you've earned that gets returned to them under confiscation. They use your money to buy votes and maintain their power over your income.

Revolting.

 

[atlkvb]

I agree with this from the pdf forum 100%

"Progressive taxation is a demonstrated failure that demands remedy by fundamental tax reform rooted in an amendment to the Constitution:
No tax shall have more than one rate which shall be equally applicable
to all taxpayers, and any deduction, exemption, or credit against a tax shall be equally beneficial to all taxpayers. Americans would find once again that poverty is best dispelled by growth-oriented public policies promoting a growing economic tide that raises all boats, not the unproductive mis-allocations of Government largess from confiscation of the efforts of our most productive citizens. As the loss of jobs and income will testify further when the New Economy capital investment boom subsides, the case for fundamental tax reform has been clearly evident for decades"

This is the next political frontier. We simply MUST eliminate progressive income taxation and switch to a national retail sales tax that taxes everyone at the same rate. We will lose our Freedom and go broke doing it keeping the current system that only empowers swamp dwellers.

 

[mneilmont]

I agree with this from the pdf forum 100%

"Progressive taxation is a demonstrated failure that demands remedy by fundamental tax reform rooted in an amendment to the Constitution:
No tax shall have more than one rate which shall be equally applicable
to all taxpayers, and any deduction, exemption, or credit against a tax shall be equally beneficial to all taxpayers. Americans would find once again that poverty is best dispelled by growth-oriented public policies promoting a growing economic tide that raises all boats, not the unproductive mis-allocations of Government largess from confiscation of the efforts of our most productive citizens. As the loss of jobs and income will testify further when the New Economy capital investment boom subsides, the case for fundamental tax reform has been clearly evident for decades"

This is the next political frontier. We simply MUST eliminate progressive income taxation and switch to a national retail sales tax that taxes everyone at the same rate. We will lose our Freedom and go broke doing it keeping the current system that only empowers swamp dwellers.

I am agreement with most of what you said, but you did get a bit into the woods for me to follow. Then you offer sales tax as a system cure all.

As an accountant, I firmly believe in the principal of "matching". We need to put the expenses used to generate income into the same accounting period that the income is recognized. Ditto, revenue recognized in same period those related expenses are recognized.

Sales tax method does not recognize "matching". Very successful business persons and some athletes will make $10,000,000 in a year's time. They will probably not spend the entire amount. So part of the earnings will not be taxed in the year it was earned. In fact, they may set up some kind of trust, or other vehicle, that is tax exempt, and the money will never be taxed.

People in a pay as you go system will be facing a higher rate to compensate for the money above that is not taxed. That is unfair to those who pay all that is owed at the time money is earned.

That leaves flat tax on all earnings above a certain amount (untaxed sum of first earnings to compensate low earners) to be taxed at a flat rate and applied to all earnings above that exempt amount. ALL taxpayers get to exclude that Congressional agreed upon amount. ALL taxpayers will pay taxes on ALL earnings above the exempt amount at a rate determined by Congress.

Do taxes on postcard using the formula; Gross Earnings - Exemption = Taxable X Rate = Tax Owed.

In the event Congress agrees a larger amount of revenue for emergency such as war or economy needs boost, it can be generated by a Surtax calculated by: Tax Owed X Congress Approved Surtax Rate = Surtax Fund.

The Surtax can only be used for the emergency designated and never co-mingled with other funds. More than one emergency could occur at the same time and they could be financed and accounted for as Surtax I, Surtax II, etc. The "matching" theory is applied here is the total tax rate that each Congress is approving to be deducted from earnings each year. Taxpayers cannot pass the tax owed to later Congresses and generations. You know within the taxing period the amount of taxes your Congressman is requiring you to pay.

A little long, but it gives you an idea what a flat tax can do and why I prefer it to a sales tax.

 

[atlkvb]

I am agreement with most of what you said, but you did get a bit into the woods for me to follow. Then you offer sales tax as a system cure all.

As an accountant, I firmly believe in the principal of "matching". We need to put the expenses used to generate income into the same accounting period that the income is recognized. Ditto, revenue recognized in same period those related expenses are recognized.

Sales tax method does not recognize "matching". Very successful business persons and some athletes will make $10,000,000 in a year's time. They will probably not spend the entire amount. So part of the earnings will not be taxed in the year it was earned. In fact, they may set up some kind of trust, or other vehicle, that is tax exempt, and the money will never be taxed.

People in a pay as you go system will be facing a higher rate to compensate for the money above that is not taxed. That is unfair to those who pay all that is owed at the time money is earned.

That leaves flat tax on all earnings above a certain amount (untaxed sum of first earnings to compensate low earners) to be taxed at a flat rate and applied to all earnings above that exempt amount. ALL taxpayers get to exclude that Congressional agreed upon amount. ALL taxpayers will pay taxes on ALL earnings above the exempt amount at a rate determined by Congress.

Do taxes on postcard using the formula; Gross Earnings - Exemption = Taxable X Rate = Tax Owed.

In the event Congress agrees a larger amount of revenue for emergency such as war or economy needs boost, it can be generated by a Surtax calculated by: Tax Owed X Congress Approved Surtax Rate = Surtax Fund.

The Surtax can only be used for the emergency designated and never co-mingled with other funds. More than one emergency could occur at the same time and they could be financed and accounted for as Surtax I, Surtax II, etc. The "matching" theory is applied here is the total tax rate that each Congress is approving to be deducted from earnings each year. Taxpayers cannot pass the tax owed to later Congresses and generations. You know within the taxing period the amount of taxes your Congressman is requiring you to pay.

A little long, but it gives you an idea what a flat tax can do and why I prefer it to a sales tax.

Not really in disagreement here. My only concern with taxing income is we still give bureaucrats too much power to arbitrarily decide how much of it_ is subjected to taxation.

With a retail sales tax, the rate can't be arbitrarily set and you decide when to pay the tax when you make a purchase. It also allows savings and investments to grow tax free, whereas under an income tax that money is also ripe for picking by swamp creatures.

I do like your idea of simplification I just don't want them deciding how much of what we earn we get to keep. I want us deciding how much tax we are willing to pay when we decide to make purchases and I want us to keep all of our earnings then pay taxes when we actually spend it. It's fair and gets applied to everyone equally.

Your idea is certainly better than what we have now though.

 

[Airport]

Not really in disagreement here. My only concern with taxing income is we still give bureaucrats too much power to arbitrarily decide how much of it_ is subjected to taxation.

With a retail sales tax, the rate can't be arbitrarily set and you decide when to pay the tax when you make a purchase. It also allows savings and investments to grow tax free, whereas under an income tax that money is also ripe for picking by swamp creatures.

I do like your idea of simplification I just don't want them deciding how much of what we earn we get to keep. I want us to keep all of it and pay tax when we actually spend it. It's fair and gets applied to everyone equally.

Your idea is certainly better than what we have now though.

By having a national sales tax, the only job of our government would be to keep business busy and making money so their employees have money to spend.

 

[mneilmont]

Not really in disagreement here. My only concern with taxing income is we still give bureaucrats too much power to arbitrarily decide how much of it_ is subjected to taxation.

With a retail sales tax, the rate can't be arbitrarily set and you decide when to pay the tax when you make a purchase. It also allows savings and investments to grow tax free, whereas under an income tax that money is also ripe for picking by swamp creatures.

I do like your idea of simplification I just don't want them deciding how much of what we earn we get to keep. I want us to keep all of it and pay tax when we actually spend it. It's fair and gets applied to everyone equally.

Your idea is certainly better than what we have now though.

You give no relief to indigent? That ain't gonna pass in this country. Are you going to come up with some sort of convoluted to get some buying power to them that excludes some of the taxes or different rate for them. Have even seen proposal that the government gives low income folks an advance of cash to support initial buying.

Who, beside the rat pack, would set the rate that you say cannot be arbitrary?

The other big problem for me would be the fact that you are retarding GDP growth when you discourage spending. Remember what happened some time back when a luxury tax was put on the purchase of yachts? It practically killed that industry.

 

[The Dunedein]

Weren't studies done some years ago showing that a flat tax rate of 10% (personal and corporate) would more than fully fund the government? I like the idea of a flat tax. Question is what happens to the mortgage interest deduction and health care expenses? Flat tax with no deductions or flat tax with limited deductions? But i like the simplicity and equality of it. If i make a ton of money, i pay the same rate as everyone else, yet if a person doesn't make a big income, they still only pay 10%. There are good arguments against a flat tax, i know, but i like it.

 

[DvlDog4WVU]

Weren't studies done some years ago showing that a flat tax rate of 10% (personal and corporate) would more than fully fund the government? I like the idea of a flat tax. Question is what happens to the mortgage interest deduction and health care expenses? Flat tax with no deductions or flat tax with limited deductions? But i like the simplicity and equality of it. If i make a ton of money, i pay the same rate as everyone else, yet if a person doesn't make a big income, they still only pay 10%. There are good arguments against a flat tax, i know, but i like it.

Ooooooooh, you’ve done it now. The board reds are gonna come after your soul!

 

[atlkvb]

You give no relief to indigent? That ain't gonna pass in this country. Are you going to come up with some sort of convoluted to get some buying power to them that excludes some of the taxes or different rate for them. Have even seen proposal that the government gives low income folks an advance of cash to support initial buying.

Who, beside the rat pack, would set the rate that you say cannot be arbitrary?

The other big problem for me would be the fact that you are retarding GDP growth when you discourage spending. Remember what happened some time back when a luxury tax was put on the purchase of yachts? It practically killed that industry.

OK I'll try to make this quick so it's easier to digest. A National retail sales tax would dictate a smaller Government, so we'd have to agree on a few things first to make it work.

1) Balanced budget amendment. With a pay-as-you-go system, there is simply no more room for deficit spending. We spend only what we take in, and only what we need of that.

2) Massive restructuring of Federal agencies...even elimination or privatization of things like FAA, NIH, OSHA, FCC, Interior, Commerce & Education departments...and oh yes the IRS! No need to have a tax code anymore or those revenue officers because the tax will be collected by the states & counties at the retail level. We'd save billions!

3) a Massive re-ordering of budgeting process. Right now we send a massive amount into Washington to have them return block grants and aid to the States. A national sales tax will reverse that, collecting money at the local level, and sending a stipend to Washington for essential services. A smaller Government will mean less is sent to Washington...small dedicated amounts could be set aside for direct funding of Military, courts, jails and other essential services.

Since States and local municipalities are already collecting the sales taxes for themselves, they can just continue that for the Federal Government.

Now to answer your other concerns. I'm not for cut outs or set asides for the indigent, but we could exempt some of their essential needs for life from the sales tax. Medicine, medical devices & equipment for example. Nancy Pelosi's botox treatments would be taxed. Hip replacements would not be. Health care would not be taxed, Health club memberships would be.

Certain foods could be exempt for the poor. Basic necessities like grains, meats, fruits, could be scanned untaxed at retail counters. Beer, cigarettes, and other "non essential" items would be taxed. Clothing would be untaxed below 35.00 for certain items. This would help families buying things like underwear, shoes, blue jeans, T-shirts etc for kids. Items above 35.00 in clothing would be considered accessories and taxed. Things like certain winter wear for age appropriate purchases could also be tax exempt. Luxury items like purses and expensive suits would be taxed.

This would be easier than the exemptions you mentioned, which would lead to more complications and a new tax code. All finished goods at the retail level would be taxed. Home construction would not be...that's a necessity. Home improvements would be, they're not.Utilities would not be taxed, entertainment amenities like cable and hi speed internet would be.

Finally I'm for allowing consumers to control their dollars, not Government. A dirty little secret is we already pay embedded taxes for the taxes corporations pay for their items. They then pass that bill onto us, and we buy items already taxed three and four times before it gets to the retail level. We pay those embedded taxes with incomes already taxed too! The sales tax eliminates embedded taxes, lowers costs of goods because companies are not passing along previously paid taxes, and increases purchasing power because incomes are not taxed.You get to keep your whole paycheck, and only pay a sales tax when you purchase a taxable item at the retail level. Workers would have more purchasing power and bigger pay checks. Buy direct from an individual, skip the tax altogether. Pay retail, pay the tax on taxable items.

Food stamp recipients already do this. Certain things they buy are allowed on their EBT cards, and other items are not. The sales tax would work the same way. Our savings and investments would not be taxed. We'd be buying items with more of the dollars free from embedded taxes, and not taxed at earning. It would expand purchasing power, increase production, lower business expenses, expand capital formation, enhance value in finished products because more of the true cost of the item is offered not buried under hidden taxes. All of this was spelled out in the "Fair Tax" by Herman Cain and Neal Boortz and except for the removal of the vouchers for necessities of poor people...most of my ideas on this come from their work.

How the FairTax works
https://fairtax.org/about/how-fairtax-works

 

[mule_eer]

Weren't studies done some years ago showing that a flat tax rate of 10% (personal and corporate) would more than fully fund the government? I like the idea of a flat tax. Question is what happens to the mortgage interest deduction and health care expenses? Flat tax with no deductions or flat tax with limited deductions? But i like the simplicity and equality of it. If i make a ton of money, i pay the same rate as everyone else, yet if a person doesn't make a big income, they still only pay 10%. There are good arguments against a flat tax, i know, but i like it.

I'm not sure about that. I did a search on average federal tax rate and found a chart done by the Tax Foundation that says in 2015 the average tax rate among all income groups was 21%. Of course that doesn't include corporations, and that's a percentage of taxable income instead of gross income, but I suspect that 10% would leave us quite a bit short given that 21% of AGI had us operating at a deficit.

With respect to the sales tax question, I think that becomes an even tougher tax rate to fund the government. It has ramifications for economic downturns as well, probably greater than an income based tax system. That's not even bringing up the ripple effect that decreased consumerism has on the job sector.

 

[atlkvb]

I'm not sure about that. I did a search on average federal tax rate and found a chart done by the Tax Foundation that says in 2015 the average tax rate among all income groups was 21%. Of course that doesn't include corporations, and that's a percentage of taxable income instead of gross income, but I suspect that 10% would leave us quite a bit short given that 21% of AGI had us operating at a deficit.

With respect to the sales tax question, I think that becomes an even tougher tax rate to fund the government. It has ramifications for economic downturns as well, probably greater than an income based tax system. That's not even bringing up the ripple effect that decreased consumerism has on the job sector.

I just don't see it as a zero sum game. I do not assume as more people find meaningful work that we have a need for as many social programs. Nor do I anticipate current services funding for non essential Government operations. Lower taxes by eliminating income taxes will mean more economic growth, similar to the expansion in the economy we've seen by a lowering of Corporate tax rates.

The more money you leave in the hands of private individuals, the more economic activity you generate. Increased economic activity means more revenues to the Treasury even if they're only coming from a sales tax. However, investments will grow, corporate earnings will grow, incomes will grow, savings will grow, thus GDP will grow. As Government shrinks and economic activity increases the budgets will move from balance to surplus, and that will increase values on the dollar and thus increase purchasing power for consumers which means more economic activity and more sales tax revenue for the Government if we're funding operations through that.

 

[Original Mountaineer1]

OK I'll try to make this quick so it's easier to digest. A National retail sales tax would dictate a smaller Government, so we'd have to agree on a few things first to make it work.

1) Balanced budget amendment. With a pay-as-you-go system, there is simply no more room for deficit spending. We spend only what we take in, and only what we need of that.

2) Massive restructuring of Federal agencies...even elimination or privatization of things like FAA, NIH, OSHA, FCC, Interior, Commerce & Education departments...and oh yes the IRS! No need to have a tax code anymore or those revenue officers because the tax will be collected by the states & counties at the retail level. We'd save billions!

3) a Massive re-ordering of budgeting process. Right now we send a massive amount into Washington to have them return block grants and aid to the States. A national sales tax will reverse that, collecting money at the local level, and sending a stipend to Washington for essential services. A smaller Government will mean less is sent to Washington...small dedicated amounts could be set aside for direct funding of Military, courts, jails and other essential services.

Since States and local municipalities are already collecting the sales taxes for themselves, they can just continue that for the Federal Government.

Now to answer your other concerns. I'm not for cut outs or set asides for the indigent, but we could exempt some of their essential needs for life from the sales tax. Medicine, medical devices & equipment for example. Nancy Pelosi's botox treatments would be taxed. Hip replacements would not be. Health care would not be taxed, Health club memberships would be.

Certain foods could be exempt for the poor. Basic necessities like grains, meats, fruits, could be scanned untaxed at retail counters. Beer, cigarettes, and other "non essential" items would be taxed. Clothing would be untaxed below 35.00 for certain items. This would help families buying things like underwear, shoes, blue jeans, T-shirts etc for kids. Items above 35.00 in clothing would be considered accessories and taxed. Things like certain winter wear for age appropriate purchases could also be tax exempt. Luxury items like purses and expensive suits would be taxed.

This would be easier than the exemptions you mentioned, which would lead to more complications and a new tax code. All finished goods at the retail level would be taxed. Home construction would not be...that's a necessity. Home improvements would be, they're not.Utilities would not be taxed, entertainment amenities like cable and hi speed internet would be.

Finally I'm for allowing consumers to control their dollars, not Government. A dirty little secret is we already pay embedded taxes for the taxes corporations pay for their items. They then pass that bill onto us, and we buy items already taxed three and four times before it gets to the retail level. We pay those embedded taxes with incomes already taxed too! The sales tax eliminates embedded taxes, lowers costs of goods because companies are not passing along previously paid taxes, and increases purchasing power because incomes are not taxed.You get to keep your whole paycheck, and only pay a sales tax when you purchase a taxable item at the retail level. Workers would have more purchasing power and bigger pay checks. Buy direct from an individual, skip the tax altogether. Pay retail, pay the tax on taxable items.

Food stamp recipients already do this. Certain things they buy are allowed on their EBT cards, and other items are not. The sales tax would work the same way. Our savings and investments would not be taxed. We'd be buying items with more of the dollars free from embedded taxes, and not taxed at earning. It would expand purchasing power, increase production, lower business expenses, expand capital formation, enhance value in finished products because more of the true cost of the item is offered not buried under hidden taxes. All of this was spelled out in the "Fair Tax" by Herman Cain and Neal Boortz and except for the removal of the vouchers for necessities of poor people...most of my ideas on this come from their work.

How the FairTax works
https://fairtax.org/about/how-fairtax-works

Would this tax system, in the short term, reduce consumption so broadly and deeply that recession would result?

 

[mule_eer]

I just don't see it as a zero sum game. I do not assume as more people find meaningful work that we have a need for as many social programs. Nor do I anticipate current services funding for non essential Government operations. Lower taxes by eliminating income taxes will mean more economic growth, similar to the expansion in the economy we've seen by a lowering of Corporate tax rates.

The more money you leave in the hands of private individuals, the more economic activity you generate. Increased economic activity means more revenues to the Treasury even if they're only coming from a sales tax. However, investments will grow, corporate earnings will grow, incomes will grow, savings will grow, thus GDP will grow. As Government shrinks and economic activity increases the budgets will move from balance to surplus, and that will increase values on the dollar and thus increase purchasing power for consumers which means more economic activity and more sales tax revenue for the Government if we're funding operations through that.

I don't understand how you privatize several of the items you suggested. Where's the profit for some company taking over the OSHA duties? Where's their authority come from? I'm afraid of where the profit lies for some company taking over the NIH duties. Some things fall to the government because they are necessary for the health and welfare of the general population, and they aren't profitable for industry. I'm not saying that you can't reorganize and reprioritize, but I don't think a lot of what you want to dump from the government would leave us in a good place.

Dumping the IRS under your new tax structure is a drop in name only. Someone has to oversee the collection to make sure no one is skimming off the top or cheating the system in some way. They also have to ensure that taxes are being assessed correctly on the goods purchased under your system where certain things aren't taxed as necessities. Call it whatever you want, but it would be doing what the IRS is currently charged with doing.

Even if your system didn't cause problems in the marketplace when it was enacted, you would see economic downturns just like we have always seen. Under your plan, the taxes collected would drop as people spent less, similar to how taxes collected drop when fewer people are employed now. The problem is that you've hamstrung the government by forcing them to spend only what they bring in while more and more people are struggling to buy the necessities. How does a market recover from that when people can't afford to make purchases? Fewer consumers means fewer goods to market, means fewer people needed to make, deliver, and sell those goods. That's a spiral with the injection of capital from somewhere, and it can't be the government.

I'm no fan of consistent deficit spending. We are in a good economy right now, so we should be at least breaking even. When the economy is bad, I expect deficit spending. I'm fine with it within reason. I'd like to recover from some of that debt when times are good though. It seems like a logical solution.

 

[atlkvb]

I don't understand how you privatize several of the items you suggested. Where's the profit for some company taking over the OSHA duties? Where's their authority come from? I'm afraid of where the profit lies for some company taking over the NIH duties. Some things fall to the government because they are necessary for the health and welfare of the general population, and they aren't profitable for industry. I'm not saying that you can't reorganize and reprioritize, but I don't think a lot of what you want to dump from the government would leave us in a good place.

Dumping the IRS under your new tax structure is a drop in name only. Someone has to oversee the collection to make sure no one is skimming off the top or cheating the system in some way. They also have to ensure that taxes are being assessed correctly on the goods purchased under your system where certain things aren't taxed as necessities. Call it whatever you want, but it would be doing what the IRS is currently charged with doing.

Even if your system didn't cause problems in the marketplace when it was enacted, you would see economic downturns just like we have always seen. Under your plan, the taxes collected would drop as people spent less, similar to how taxes collected drop when fewer people are employed now. The problem is that you've hamstrung the government by forcing them to spend only what they bring in while more and more people are struggling to buy the necessities. How does a market recover from that when people can't afford to make purchases? Fewer consumers means fewer goods to market, means fewer people needed to make, deliver, and sell those goods. That's a spiral with the injection of capital from somewhere, and it can't be the government.

I'm no fan of consistent deficit spending. We are in a good economy right now, so we should be at least breaking even. When the economy is bad, I expect deficit spending. I'm fine with it within reason. I'd like to recover from some of that debt when times are good though. It seems like a logical solution.

I see all kinds of incentives for privatization of almost everything Government does. Who underwrites casualty insurance companies that insure workers against injuries on the job? Isn't that OSHA's primary mission...worker safety? There isn't a financial incentive for companies to help other companies remain in compliance to get lower workman's comp insurance?

NIH...there is no financial incentive for health care providers to study the causes of infectious disease, or work for cures? Hospitals or other care providers wouldn't see a need and profit in serving as clearinghouses for the study of, quarrentines, or eradication of communicable diseases? Private community based health clinics couldn't serve profitably as service centers for things like AIDS, drug addictions, or STD's?

We'd save Billions...literally billions eliminating the IRS. As I said in my post most State and local municipalities already collect sales taxes for themselves so we have a built in collection agency. We may need a small staff of accountants to keep track of uncle Sam's cut sent in by the local yocals, but again I'd privatize that too to a firm like Pete Marwick Assoc. or Fidelity investments to track and direct federal allocations to the proper agencies of what would be left of Leviathan.

The taxable nature of things could be handled like all taxable and non taxable items are currently handled at checkout counters. If you'd prefer, you could present Federally issued "tax exempt" cards that can be scanned before you make your purchases and it would eliminate all taxed items. We have that at our Dealership...certain buyers are tax exempt and their files are kept by our accounting office.

My point is it wouldn't be hard to separate out what gets taxed and what doesn't. We already do it. Here in Georgia right before school starts back after the Summer, we have "sales tax holidays" where certain school related items can be purchased without the sales tax. Retail items for the Federal sales tax could be treated the exact same way. No special software is needed, just a list items that are tax exempt is published by the Secretary of State and it's available online for shoppers and when they buy those things there is no sales tax added to them at the checkout.

I stated before I don't see this as zero sum game. Yes there will be downturns, but the beauty of my system is it's pay-as-you-go. Government cannot spend any more than it is given to spend, especially if we require a balanced budget. Forcing Government to downsize and live within its means is the whole idea rather than the current system that simply arbitrarily decides it needs more and demands it from taxpayers.The economy will grow more than it shrinks because people will keep their entire paychecks and only pay the tax when they spend their money. Those dollars are only taxed at the point of sale, otherwise they belong to savings, investments, or other goods and services not sold at the retail level.

I said we'd have to reorient how we do business in order to make this work, but that's what radical tax reform and Government restructuring looks like.

 

[atlkvb]

Would this tax system, in the short term, reduce consumption so broadly and deeply that recession would result?

No, quite the opposite. With increased purchasing power, and lower prices for finished goods and services (because embedded taxes are removed) there would be immediate economic expansion. Government doesn't create demand, neither do taxes. Consumers create demand, and people provide goods and services at market prices to meet it. Jobs result from people providing goods and services that people need want or desire at market prices.

 

[boomerwv]

I'm not sure about that. I did a search on average federal tax rate and found a chart done by the Tax Foundation that says in 2015 the average tax rate among all income groups was 21%. Of course that doesn't include corporations, and that's a percentage of taxable income instead of gross income, but I suspect that 10% would leave us quite a bit short given that 21% of AGI had us operating at a deficit.

With respect to the sales tax question, I think that becomes an even tougher tax rate to fund the government. It has ramifications for economic downturns as well, probably greater than an income based tax system. That's not even bringing up the ripple effect that decreased consumerism has on the job sector.

Estimates I have seen show we would need around a 25% national sales tax to make up for losses elsewhere. That doesn't take into account state taxes which likely wouldn't change, so individuals and corporations would continue to have tax debt burdens. Also, prices of goods would not decrease because Dale's tax on raw materials would increase as well to offset savings elsewhere.

Poorer people would be under greater burden since they must spend higher percentages of their income to get by.

A sales tax only system is idiotic.

 

[atlkvb]

Estimates I have seen show we would need around a 25% national sales tax to make up for losses elsewhere.

You are assuming current services funding for Government and no adjustments in discretionary outlays. You can't assume that when we are also passing a balanced budget amendment, line item veto, and privatizing most if not all of what Government does.

 

[atlkvb]

Poorer people would be under greater burden since they must spend higher percentages of their income to get by.

Poor people would have more purchasing power because embedded taxes would be removed from the finished goods they buy, many of their basic necessities for Life could be tax exempt, and they will have higher wages because they will be able to keep all of their paychecks and will be paid higher wages. An expanding economy will also mean better job opportunities for them to move up the economic ladder, and with all of their paychecks they will have more disposable incomes for luxury items and other amenities they cannot afford now.

 

[mule_eer]

No, quite the opposite. With increased purchasing power, and lower prices for finished goods and services (because embedded taxes are removed) there would be immediate economic expansion. Government doesn't create demand, neither do taxes. Consumers create demand, and people provide goods and services at market prices to meet it. Jobs result form people providing goods and services that people need want or desire at market prices.

Which was my point earlier about economic downturns. When the economy falls into recession, what is going to help pull it out of recession. Demand for goods goes down, need to produce goods drops to compensate which endangers the jobs of more people. That in turn results in decreased demand. What makes that cycle stop? The government has fewer assets to try to inject capital into the process.

 

[atlkvb]

Which was my point earlier about economic downturns. When the economy falls into recession, what is going to help pull it out of recession. Demand for goods goes down, need to produce goods drops to compensate which endangers the jobs of more people. That in turn results in decreased demand. What makes that cycle stop? The government has fewer assets to try to inject capital into the process.

We have business cycles now and downturns but people don't stop living, eating, using electricity, etc. I'm not worried about what happens to Government revenues when business slides off. Under a pay-as-you-go system that's just money Government doesn't get to spend. Why does everything we do in our lives have to revolve around what Government needs?

A smaller Government through privatization, balanced budget, line item veto, and zero based budgeting will assure we're not spending anything more than we absolutely have to for essential services no matter what the economic climate. Our Capitalistic economy survives ups and down in the stock market, expansions and shrinkage of GDP, business booms and busts, and high as well as low unemployment. We would be able to survive any economic downturn if it happened, and the smaller Government would be before that the better.

 

[boomerwv]

We have business cycles now and downturns but people don't stop living, eating, using electricity, etc. I'm not worried about what happens to Government revenues when business slides off. Under a pay-as-you-go system that's just money Government doesn't get to spend. Why does everything we do in our lives have to revolve around what Government needs?

A smaller Government through privatization, balanced budget, line item veto, and zero based budgeting will assure we're not spending anything more than we absolutely have to for essential services no matter what the economic climate. Our Capitalistic economy survives ups and down in the stock market, expansions and shrinkage of GDP, business booms and busts, and high as well as low unemployment. We would be able to survive any economic downturn if it happened, and the smaller Government would be before that the better.

What if there were unicorns and leprechauns?

Let's try to deal in reality. Budgets are not decreasing. Republicans have united government and the budget and deficit went up, that will continue. You can forget line item vetoes too. They are unconstitutional for starters.

 

[atlkvb]

What if there were unicorns and leprechauns?

Let's try to deal in reality. Budgets are not decreasing. Republicans have united government and the budget and deficit went up, that will continue. You can forget line item vetoes too. They are unconstitutional for starters.

Yeah let's try and deal with the reality most of us do when we know we can't open up charge accounts to buy things we have no way to pay for. Let's deal in reality that most of us who have budgets know that we can't blow 'em up with the stroke of a pen to increase our debt ceiling. Let's deal in reality that most of us who work for a living understand that our incomes are not unlimited, so we need to be careful as well as frugal with the limited resources we earn.

Let's deal with reality of no more Government than the Constitution requires. Let's deal in reality of starting every year in every program at zero...and making bureaucrats cost justify their requests for additional funding from the previous year. Let's deal in the reality that the money belongs to taxpayers, not swamp dwellers, and the fewer of them we have around the less swamp we have to drain. Let's deal in the reality of voters waking up and making Government fiscally accountable to the people who fund it, and ultimately have Constitutional authority over it...We the People.

How about dealing with that reality?

 

[atlkvb]

You can forget line item vetoes too. They are unconstitutional for starters.

Hey Fella...75-to-80% of what Leviathan does and runs up debt doing it is unconstitutional! Find the Constitutional provision for me in there for the myriad alphabet soup agencies that currently bloat our Federal budget every year? How about if it's not specifically called for in the Constitution, we eliminate the program since you're so willing to use the Constitution as a guide?

 

[atlkvb]

Estimates I have seen show we would need around a 25% national sales tax to make up for losses elsewhere.

Right now before personal or itemized exemptions the average wage earner has approximately 28% of their earnings taxed (pre filing). Add FICA,(7.5%) and State obligations where income is taxed anywhere from (3-9%) and you're looking at roughly 44-45% of pre-itemized dollars taxed at earning. Then of course we still pay State or local sales taxes, taxes on gasoline, airline tickets, movie theater tickets, dining, Sporting goods, hotels and an almost endless list of taxable items. If you add up all of those taxes in some areas of the country it approaches 70% of your income that is taxed away in one form or another. 70%!!!! If you eliminate income taxes and FICA taxes alone you immediately cut that in half. Removing income taxes also removes a huge chunk of embedded taxes we also pay that corporations pass along to us when they too are forced to pay taxes on their incomes as well as sales taxes.

So the prices of finished goods would be lower without the costs of those embedded taxes added in, and we'd be buying those things with untaxed earned income dollars. That means more purchasing power. So paying a 25% retail tax (if it's even that high) is still only a 1/4 of what the current total tax rate is on earned dollars that are taxed on our income. We come out ahead with a straight retail sales tax any way you measure it.

 

[~IRWT~]

Estimates I have seen show we would need around a 25% national sales tax to make up for losses elsewhere. That doesn't take into account state taxes which likely wouldn't change, so individuals and corporations would continue to have tax debt burdens. Also, prices of goods would not decrease because Dale's tax on raw materials would increase as well to offset savings elsewhere.

Poorer people would be under greater burden since they must spend higher percentages of their income to get by.

A sales tax only system is idiotic.

Fantasy land. We are spending 900 billion on defense spending. Trillion on infrastructure and medicare let alone education and all the other basic necessities of a civilized society. I'm all for figuring out how to cut spending in smart places and reducing tax burden but abolishing federal income tax is dumb. Most "wealth" is fostered by the environment created by a stable government not in spite of. I get the basic cake and eat it too mentality most people have but never understood how people always think its "the other guy" who is always getting the benefits.

 

[atlkvb]

Fantasy land. We are spending 900 billion on defense spending. Trillion on infrastructure and medicare let alone education and all the other basic necessities of a civilized society. I'm all for figuring out how to cut spending in smart places and reducing tax burden but abolishing federal income tax is dumb. Most "wealth" is fostered by the environment created by a stable government not in spite of. I get the basic cake and eat it too mentality most people have but never understood how people always think its "the other guy" who is always getting the benefits.

There is nothing in a national retail sales tax that says we have to do without anything in Government we truly need. Military would get full funding...probably more because we'd be able to reduce so much other wasteful spending by passing a balanced budget and eliminating other needless spending through outsourcing and privatization of non essential services.

 

[DvlDog4WVU]

Fantasy land. We are spending 900 billion on defense spending. Trillion on infrastructure and medicare let alone education and all the other basic necessities of a civilized society. I'm all for figuring out how to cut spending in smart places and reducing tax burden but abolishing federal income tax is dumb. Most "wealth" is fostered by the environment created by a stable government not in spite of. I get the basic cake and eat it too mentality most people have but never understood how people always think its "the other guy" who is always getting the benefits.

Interesting opinions.

 

[mneilmont]

OK I'll try to make this quick so it's easier to digest. A National retail sales tax would dictate a smaller Government, so we'd have to agree on a few things first to make it work.

1) Balanced budget amendment. With a pay-as-you-go system, there is simply no more room for deficit spending. We spend only what we take in, and only what we need of that.

2) Massive restructuring of Federal agencies...even elimination or privatization of things like FAA, NIH, OSHA, FCC, Interior, Commerce & Education departments...and oh yes the IRS! No need to have a tax code anymore or those revenue officers because the tax will be collected by the states & counties at the retail level. We'd save billions!

3) a Massive re-ordering of budgeting process. Right now we send a massive amount into Washington to have them return block grants and aid to the States. A national sales tax will reverse that, collecting money at the local level, and sending a stipend to Washington for essential services. A smaller Government will mean less is sent to Washington...small dedicated amounts could be set aside for direct funding of Military, courts, jails and other essential services.

Since States and local municipalities are already collecting the sales taxes for themselves, they can just continue that for the Federal Government.

Now to answer your other concerns. I'm not for cut outs or set asides for the indigent, but we could exempt some of their essential needs for life from the sales tax. Medicine, medical devices & equipment for example. Nancy Pelosi's botox treatments would be taxed. Hip replacements would not be. Health care would not be taxed, Health club memberships would be.

Certain foods could be exempt for the poor. Basic necessities like grains, meats, fruits, could be scanned untaxed at retail counters. Beer, cigarettes, and other "non essential" items would be taxed. Clothing would be untaxed below 35.00 for certain items. This would help families buying things like underwear, shoes, blue jeans, T-shirts etc for kids. Items above 35.00 in clothing would be considered accessories and taxed. Things like certain winter wear for age appropriate purchases could also be tax exempt. Luxury items like purses and expensive suits would be taxed.

This would be easier than the exemptions you mentioned, which would lead to more complications and a new tax code. All finished goods at the retail level would be taxed. Home construction would not be...that's a necessity. Home improvements would be, they're not.Utilities would not be taxed, entertainment amenities like cable and hi speed internet would be.

Finally I'm for allowing consumers to control their dollars, not Government. A dirty little secret is we already pay embedded taxes for the taxes corporations pay for their items. They then pass that bill onto us, and we buy items already taxed three and four times before it gets to the retail level. We pay those embedded taxes with incomes already taxed too! The sales tax eliminates embedded taxes, lowers costs of goods because companies are not passing along previously paid taxes, and increases purchasing power because incomes are not taxed.You get to keep your whole paycheck, and only pay a sales tax when you purchase a taxable item at the retail level. Workers would have more purchasing power and bigger pay checks. Buy direct from an individual, skip the tax altogether. Pay retail, pay the tax on taxable items.

Food stamp recipients already do this. Certain things they buy are allowed on their EBT cards, and other items are not. The sales tax would work the same way. Our savings and investments would not be taxed. We'd be buying items with more of the dollars free from embedded taxes, and not taxed at earning. It would expand purchasing power, increase production, lower business expenses, expand capital formation, enhance value in finished products because more of the true cost of the item is offered not buried under hidden taxes. All of this was spelled out in the "Fair Tax" by Herman Cain and Neal Boortz and except for the removal of the vouchers for necessities of poor people...most of my ideas on this come from their work.

How the FairTax works
https://fairtax.org/about/how-fairtax-works

Damn, when you make things short and sweet ... you write an instruction book. Kidding, times when I get started and cannot find a place to stop.

i will be short - gotta go out for a few hours. The sales tax creates a very convoluted system, IMO. Would like to get rid of the complicated tax instruction book .

You spoke of imbedded taxes, Expand a little please. Most situations where tax is on a product that goes into the final product for consumption provides a Credit to recapture that tax somewhere.

Some fed departments could easily be eliminated.

Allowances for indigent are going to be created. In my flat tax, I make allowances in the first dollars earned. For fairness, that exemption is available to every taxpayer, Earnings beyond that would be taxed at a flat rate for ALL.

I can see a hell of a black market in your system.

LATER.

 

[~IRWT~]

There is nothing in a national retail sales tax that says we have to do without anything in Government we truly need. Military would get full funding...probably more because we'd be able to reduce so much other wasteful spending by passing a balanced budget and eliminating other needless spending through outsourcing and privatization of non essential services.

From Motley Fool....

In no particular order, the 10 countries with no income taxes are:

• United Arab Emirates
• Oman
• Bahrain
• Qatar
• Saudi Arabia
• Kuwait
• Bermuda
• Cayman Islands
• The Bahamas
• Brunei

Notice a trend?With the exception of Brunei in Asia, this entire list of income-tax free countries is dominated by Middle Eastern or tropical tourist destinations that rely on essentially two factors to help generate revenue. For the six Middle Eastern countries and Brunei, it's oil and natural gas deposits that contribute to a significant portion GDP, while the Bahamas, the Cayman Islands, and Bermuda rely on tourism and the extremely high living costs to drive wealthy individuals into their country.

In many cases, however, oil and gas revenue and tourism aren't enough to keep the economic hamster on its wheel. Although these countries don't directly tax their citizens with an income tax, there are other forms of revenue collection.

Many countries, for instance, require citizens to contribute to a national social security fund while also requiring employers to make contributions on behalf of their employees. You'll find this practice in place in Kuwait, Oman, the Bahamas, Saudi Arabia, and the United Arab Emirates, just to name a few.

Another trend you'll notice within these countries, especially the Middle East, is a rising number of foreign workers. The attraction of paying no income taxes, and in some cases avoiding taxes levied only on country nationals, lures foreigners in droves to these countries, especially when it comes to working in the highly lucrative energy business. Because foreigners are often willing to work for lower pay than citizens are, it could create an unemployment issue for current citizens or a tax burden for the Middle Eastern countries down the road.

 

[atlkvb]

Folks what those of you who are skeptical of this plan are inherently assuming is something you must unassume. That is we WILL NOT have the same type of Government under this plan we have now! Not in any way, shape, form, size, purpose, or mission.

This tax plan by design limits Government by limiting its power to confiscate our money. There will be NO IRS. NO tax code. NO payroll witholding. NO filing of 1040s, none of that! You keep 100% of whatever you earn.

This plan will fund only the Government necessary to function Constitutionally. There will be NO EPA, NO Dept of Education, NO OSHA, no Dept of Commerce, or Labor, or Interior, or Housing & Urban development , or Health & Human services....none of that.

You have to radically reorient both what you think of and expect from Government in order to understand and ultimately appreciate what this plan means to you. You will be able to do for yourself instead of leaving it up to Government or asking taxpayers to do it for you.

Freedom. Freedom to decide for yourself what to do with the money you earn. Freedom to manage your tax liability, spending, saving, investing. NO death taxes, no Capital gains taxes, no retirement income taxes, no Corporate income taxes.

Freedom. To build a business, a retirement income, a Family...tax free if that's your desire. You pay only the taxes you choose when you choose to make retail purchases. Government gets only the money we give it. It is not designed for social engineering like the current tax code is designed to force certain behaviors from you. It is designed to pay only for those essential Government services we allow, under the Constitution based on what we can afford not what swamp dwellers demand we pay for.

It is a radical, fundamental, philosophical, shift away from Big Government as we know it and directed towards personal Liberty like we've never had it in the history of this Republic.

Think outside the box when considering this plan. It's NOT business as usual.

 

[mneilmont]

Folks what those of you who are skeptical of this plan are inherently assuming is something you must unassume. That is we WILL NOT have the same type of Government under this plan we have now! Not in any way, shape, form, size, purpose, or mission.

This tax plan by design limits Government by limiting its power to confiscate our money. There will be NO IRS. NO tax code. NO payroll witholding. NO filing of 1040s, none of that! You keep 100% of whatever you earn.

This plan will fund only the Government necessary to function Constitutionally. There will be NO EPA, NO Dept of Education, NO OSHA, no Dept of Commerce, or Labor, or Interior, or Housing & Urban development , or Health & Human services....none of that.

You have to radically reorient both what you think of and expect from Government in order to understand and ultimately appreciate what this plan means to you. You will be able to do for yourself instead of leaving it up to Government or asking taxpayers to do it for you.

Freedom. Freedom to decide for yourself what to do with the money you earn. Freedom to manage your tax liability, spending, saving, investing. NO death taxes, no Capital gains taxes, no retirement income taxes, no Corporate taxes.

Freedom. To build a business, a retirement income, a Family...tax free if that's your desire. You pay only the taxes you choose when you choose to make retail purchases. Government gets only the money we give it. It is not designed for social engineering like the current tax code is designed to force certain behaviors from you. It is designed to pay only for those essential Government services we allow, under the Constitution based on what we can afford not what swamp dwellers demand we pay for.

It is a radical, fundamental, philosophical, shift away from Big Government as we know it and directed towards personal Liberty like we've never had it in the history of this Republic.

Think outside the box when considering this plan. It's NOT business as usual.

And, you think there is a chance in hell that can get past congress?

I am not in disagreement that the constitution should be what guides us. And we should only be required to fund those programs that we cannot provide for ourselves. How do you deal with the excesses when you ask congress to stick to the Constitution. I don't like it, but the Constitution provides for some leeway in that they provided for a congress to make laws. Where is there a Constitutional limitation on the laws Congress can pass?

 

[atlkvb]

And, you think there is a chance in hell that can get past congress?

I am not in disagreement that the constitution should be what guides us. And we should only be required to fund those programs that we cannot provide for ourselves. How do you deal with the excesses when you ask congress to stick to the Constitution. I don't like it, but the Constitution provides for some leeway in that they provided for a congress to make laws. Where is there a Constitutional limitation on the laws Congress can pass?

The voting booth.

 

[mneilmont]

The voting booth.

The voting boot has changed the Constitution how many times.? Granted it is not impossible, but it is extremely improbable.

 

[atlkvb]

The voting boot has changed the Constitution how many times.? Granted it is not impossible, but it is extremely improbable.

Yes changing the Constitution is admittedly very difficult I'll agree with you on that. But who says we have to? Its still pretty much intact today as it was written and ammeneded it just is ignored.

That's easy to fix. We vote out our representatives who ignore it or spit on it.

Mneilmomt we get the exact type of Government we demand. Right now we have a large majority of Americans with their hands outstretched waiting (demanding) some pol put a goody in it. We need more folks with their hands in the dirt planting their own goodies.

If we demanded more Constitutional Freedom and Liberty, we'd get it or get rid of lawmakers who try to deny it. We are our own worst enemies. What we have today with Leviathan is quite frankly a direct result of us...our laziness, selfishness, ignorance, and indifference.

 

[mneilmont]

Yes changing the Constitution is admittedly very difficult I'll agree with you on that. But who says we have to? Its still pretty much intact today as it was written and ammeneded it just is ignored.

That's easy to fix. We vote out our representatives who ignore it or spit on it.

Mneilmomt we get the exact type of Government we demand. Right now we have a large majority of Americans with their hands outstretched waiting (demanding) some pol put a goody in it. We need more folks with their hands in the dirt planting their own goodies.

If we demanded more Constitutional Freedom and Liberty, we'd get it or get rid of lawmakers who try to deny it. We are our own worst enemies. What we have today with Leviathan is quite frankly a direct result of us...our laziness, selfishness, ignorance, and indifference.

What we have now is a party system that would vote for the party over the country. That is sad when the founders envisioned electing patriots to lead the political system. Maybe a bit cynical, but I cannot see a way out. The country elected the man I was for 8 years ago to put us back on road to economic growth at a strong rate. The current system has railroad the election with trickery used to stall all efforts to move forward. I do believe you are looking at what could have been more than reality of what is.

 

[atlkvb]

What we have now is a party system that would vote for the party over the country. That is sad when the founders envisioned electing patriots to lead the political system. Maybe a bit cynical, but I cannot see a way out. The country elected the man I was for 8 years ago to put us back on road to economic growth at a strong rate. The current system has railroad the election with trickery used to stall all efforts to move forward. I do believe you are looking at what could have been more than reality of what is.

Perhaps. All I know is we still are Free, and we still can vote. Information is power. Powerfully informed people can make changes. It's up to us, they're not forcing us to vote for their "party".

 

[atlkvb]

You spoke of imbedded taxes, Expand a little please.

Corporations don't pay taxes. The taxes they pay are passed along to their customers in the form of higher prices for their goods and services. That additional cost recovers their tax liability.

Here is it explained at FairTax.org:

http://www.ohfairtax.org/FAQ/FAQEmbedded.htm

 

[mneilmont]

Corporations don't pay taxes. The taxes they pay are passed along to their customers in the form of higher prices for their goods and services. That additional cost recovers their tax liability.

Here is it explained at FairTax.org:

http://www.ohfairtax.org/FAQ/FAQEmbedded.htm

That is interesting and I am sure every business would like to be in a world that all they had to do to get more money for their product is to increase their price to recapture all of those taxes, including income tax. My coal operations did not operate in your world.

There is a thing called the market price or contract price. That is how my price was established. I damned sure did not have the luxury of passing along tax increases. I accepted the market price or try my damnedest to eat the coal - not tasty. If I couldn't make a profit from the sale I would close production. Of course all the taxes were included in my operating cost - except Corp Income tax. That strictly came out of my(company) profit. The other several taxes by state and federal were line item operating cost.

If demand is greater than supply, you could possibly negotiate into the world you described. I was always in a world that supply potential was greater than demand. In that world, the consumer could refuse your coal and go to the mine in the next hollow and get his supply.

Gotta be careful when you repeat something that is written by someone who did not research his facts.