No Income Tax; 5-10% Federal Consumption Tax

[Root]

A big problem with sales taxes, is it uses the business collecting the tax and unpaid tax (unwilling) collectors. The business owner, must then take time/production away from profit earning once a month/quarter to calculate the tax obligation owed by all their customers. I'm sure there's a way to collect the tax without using the business owners labor to do so, but I'm not sure what that looks like in practice.

 

[DamianTV]

No Taxation Without Representation. We have No Representation, thus we should have No Taxation. Sure that sounds a little anarchist, but then again, our Founding Fathers were Terrorizers too!

 

[Brian4Liberty]

Does a consumption tax apply to labor? If a person is hired to mow your lawn, is that a taxable event? Who pays it to the government?

no exemptions. anything a person PURCHASES has a 10 percent tax.

Including labor? I am not familiar with all of the various proposals, but it seems like hiring a person to do something is a "purchase" of a service.

So who pays the government? The seller? In that case, it seems like a sales tax is very close to an income tax. If someone pays you, it it a taxable event, and you are responsible for reporting and paying the government.

A big problem with sales taxes, is it uses the business collecting the tax and unpaid tax (unwilling) collectors. The business owner, must then take time/production away from profit earning once a month/quarter to calculate the tax obligation owed by all their customers. I'm sure there's a way to collect the tax without using the business owners labor to do so, but I'm not sure what that looks like in practice.

Agree that it is a major pain and a drag on productivity to do tax related paperwork. One difference between an indivdual and a business is that businesses already must perform some amount of paperwork, even if it is just accounting. I would prefer to first eliminate 100% of the burden from the individual.

 

[jbauer]

Its fun to talk about getting rid of taxes, but lets face the fact that we have a Government that already thinks "they" create the wealth. How the heck are you gonna convince them to give up any power of taxation without some sort of systematic collapse?

 

[Zippyjuan]

Let's check some numbers. Total US personal consumption in 2011 was $10.76 trillion. http://useconomy.about.com/od/grossdomesticproduct/f/GDP_Components.htm That includes goods and services. To keep numbers the same, let's also look at the US budget for 2011. http://en.wikipedia.org/wiki/2011_United_States_federal_budget That called for $3.8 trillion in spending. If we were to keep spending the same you would need a national sales tax rate of 35%- not five to ten percent. $4 a gallon of gas would go up to $5.40 a gallon. If you exclude services from taxes and only tax the sale of goods (from the same source above) which came to $3.6 trillion, your sales tax would be just over 100%. Now your $4 gas is over $8 a gallon.

Consider also that some 45% of all federal income tax filers do not owe any net taxes. Suddenly they would be hit with paying 35% more for everything they buy (or 100% depending on if services are excluded). In all likelyhood, the people here are mostly in that 45%. Thus for the majority of tax payers, replacing all taxes with a national sales tax would mean paying much higher taxes than they currently do. Those at the high end would see their taxes reduced. Lower income people also spend a higher precent of their income purchasing goods than the wealthy do so as a percent of income would be paying a signficanatly higher effective tax rate.

But let's ignore the size of government today. How much could you fund if you went with a ten percent tax rate on goods and services? You could collect $1.076 trillion in taxes (assuming consumption did not go down due to the higher taxes on goods and services which it likely would). That would cover Social Security and Medicare and nothing else. If you exclude services, a ten percent tax on goods would raise $360 billion which would cover about half of Social Security. http://en.wikipedia.org/wiki/2010_United_States_federal_budget A five percent sales tax on goods and not services would only cover the interest on the debt.