National sales tax, flat tax or ?

[quade 4]

How would you change the basic tax structure of the USA?

I'm thinking that if you move to a flat tax or national sales tax, you basically throw out all deductions . . . otherwise, how would that work? So, do home sales plummet?

quade -
The World's Most Boring Skydiver

[billvon 3,119]

Sales tax, with exemptions on basics (food, clothing) for the very poor. Other than that, a flat sales tax for goods and services.

[quade 4]

How would a national sales tax affect sales of big ticket items? Would sales plummet?

Would people buy fewer luxury cars for instance?

quade -
The World's Most Boring Skydiver

[billvon 3,119]

>How would a national sales tax affect sales of big ticket items?
>Would sales plummet?

I think the opposite would happen. The immediate effect of a flat tax would be an X percent price inflation; basically compressing 15-20 years of inflation into a short time (unless it was phased in over several years.) That would depress sales only until the greater purchasing power that comes from elimination of income tax kicked in. A flat sales tax benefits the rich much more than it benefits the poor, so big ticket items would tend to do better than the basics. Basics would see a minor slump (unless there was a provision to not tax food, clothing etc sold to low income people.)

[Kennedy 0]

I would suggest a flat sales tax, with food only exemptions for the most destitute, and a higher tax rate for certain "luxury items."

You think big ticket items would drop? Are you kidding? These people already pay 100,000 for their cars, and own several. I doubt they'd care much about sales tax.

One does have to wonder what would happen to all the things businesses to do avoid paying the govt (sponsoring teams, donating to charities, etc).

I think individual spending for charities and sponsorships would skyrocket, but I can't guess what businesses would do.

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[quade 4]

What about the home mortgage deduction . . . would people be willing to give that up? What would that do to what is most people's largest investment?

quade -
The World's Most Boring Skydiver

[billvon 3,119]

>What about the home mortgage deduction . . . would people be
>willing to give that up?

?? No income tax, no income tax deductions.

>What would that do to what is most people's largest investment?

Nothing much. People would tend to live in rentals more since there would be less benefit to buying a house. But that's not the end of the world.

[quade 4]

Well, wouldn't buying a home actually be a huge liability rather than benefit as it is today?

Folks today can refinance their homes, pay off credit card debt, play games with home equity loans . . . all income tax deductable right? That all goes away with a national sales tax or flat tax -- yes?

quade -
The World's Most Boring Skydiver

[ltdiver 3]

Quote

>What about the home mortgage deduction . . . would people be
>willing to give that up?

?? No income tax, no income tax deductions.

>What would that do to what is most people's largest investment?

Nothing much. People would tend to live in rentals more since there would be less benefit to buying a house. But that's not the end of the world.

What about a flat income tax?

ltdiver

Don't tell me the sky's the limit when there are footprints on the moon

[billvon 3,119]

>Well, wouldn't buying a home actually be a huge liability rather than benefit as it is today?

It would simply not have as many tax benefits.

Here in San Diego, I've made around $50,000 in two years from increases in housing prices. Hard to say that would be a liability even if I didn't have a tax deduction.

>Folks today can refinance their homes, pay off credit card debt, play
> games with home equity loans . . . all income tax deductable right?
> That all goes away with a national sales tax or flat tax -- yes?

The deduction goes away, yes. The low-rate loans do not since real estate is excellent collateral no matter what the tax scheme.

[billvon 3,119]

>What about a flat income tax?

With deductions for houses and such? You'd be at the same system we have now, except the poor would be more screwed. A flat tax is essentially a massive tax cut for the rich (compared to what we have now) and a massive hit on low-income people.

[skydyvr 0]

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A flat tax is essentially a massive tax cut for the rich (compared to what we have now) and a massive hit on low-income people.

Exactly. I don't understand why we can't have a pregressive income tax system, yet make it very simple rather than the impossibly complex system we have today.

. . =(_8^(1)

[ltdiver 3]

What would you (and what has the government) labeled as our 'poor class'? What income level?

ltdiver

Don't tell me the sky's the limit when there are footprints on the moon

[lawrocket 3]

I'd go with a national sales tax. Of course, there's a lot of fighting over this because it will "tax the poor."

If staples such as food were not taxed (heck, keep taxing McDonalds and other prepared food establishments), and secondhand clothing and furniture were not taxed, some people could possibly go tax free while purchasing necessities.

My wife is hotter than your wife.

[PhillyKev 0]

I think a national sales tax plus a flat investment income tax. Otherwise there will be massive hoarding of dollars which could damage the economy.

[nanook 1]

This, though last year is considered poverty.2003 poverty income

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[lawrocket 3]

Quote

I think a national sales tax plus a flat investment income tax. Otherwise there will be massive hoarding of dollars which could damage the economy.

Actually, I may disagree. If you get rid of taxes on investments, more investment may occur.

You can put a sales tax on business capital and services. But once that cost is covered, you won't owe any taxes on the economic gains. This may even be good for a "value added tax."

I think that if there's a buck to be made without being taxed, then people will not horde the money - they'll invest it.

My wife is hotter than your wife.

[rehmwa 2]

Quote

If staples such as food were not taxed (heck, keep taxing McDonalds and other prepared food establishments), and secondhand clothing and furniture were not taxed, some people could possibly go tax free while purchasing necessities.

Much better idea to exept certain types of products rather than certain classes if you want to show preferential treatment to a particular demographic over another. Easier to implement, too. I like the idea of food and second hand items being the only things and not getting crazy and extending that into cars, housing, cell phones

Also that meets the intent and doesn't require a special id card (or whatever) for individuals - less management required.

I'm certain a sales tax only model would eventually go nuts anyway, so in the end it wouldn't make much difference. No matter what system comes in place, well meaning policies will eventually drive bias and complexity. The only fair system is one that treats everyone equally. Won't happen.

...
Driving is a one dimensional activity - a monkey can do it - being proud of your driving abilities is like being proud of being able to put on pants

[billvon 3,119]

> What would you (and what has the government) labeled as our 'poor class'? What income level?

You can do that several ways.

One, have a hard cutoff at the poverty level. Might be a bad idea since there would be an incentive not to make more than X dollars a year.

Two, use a scaled progressive tax. It starts out at a low percentage and gradually climbs per a simple formula. For example:

(1-4^(-(income/50000)))/2

This would give you a 12% tax on someone who made 20K a year, 37% on someone who made 100K a year, and 50% on someone who made $1 million a year.

If you want the max tax to be lower, change the /2 to a /3 (that gives you a max 33%.) If you want taxes to rise more slowly with income level, change the 4 to a 3 or a 2. This is similar to what we have now, except we are not allowed to do the math ourselves and hence there's a "step" at certain incomes; this has the effect of penalizing small increases in wages, which is bad.

Three, ramp it up linearly over a small region (i.e. zero tax up to 20K, 0-30% tax from 20 to 30K rising linearly, then 30% above that.) That way there is no case where making another $10 a week means you make less money overall.

[billvon 3,119]

>I like the idea of food and second hand items being the only things . . .

Which would essentially drive most of the nation's commerce onto Ebay and the like. An interesting idea, but one that would have negative consequences to retailers. You have to be verrrrry careful allowing exceptions to any flat tax, because a capitalistic system takes advantage of every such loophole in the most bizarre ways possible. And of course the lobby with the most money tends to get the exemptions.

[DrewEckhardt 0]

Captitation.

Where practical government services should be covered by user fees like the US postal service. USPS's entire operating budget is paid for with postage. Interestate highway and controlled airspae useage could be covered by tolls. Military liberation of foreign countries could be paid for by their treasuries.

Where that doesn't work take the budget, subtract government income from other sources, divide the resulting quantity by the number of able bodied individuals, and send everyone an annual bill for their entire share. Have some form of grandfathering for people who planned for retirement under the old system so we aren't passing an ex-post-facto law.

Government service use doesn't increase with income and taxes shouldn't either.

The other part is to get people aware of what they're actually paying. $380 a paycheck doesn't look as big as $20000 a year. If you're not self employed your pay stubs don't show the employer's share of Social Security/Medicare which is up to 7.5%. Federal+state unemployment insurance payments aren't there either.

I think support for a large government spending lots of money would disappear once people were paying for their share of the government and had to deal with the yearly total all at once.

[billvon 3,119]

>Where practical government services should be covered by user fees like
>the US postal service.

Unfortunately, some government services (like the EPA) benefit everyone and are not amenable to user fees (unless you add a "breathing fee" or something like that.)

>Interestate highway and controlled airspae useage could be covered by
> tolls.

We do that to some degree now with registration, licensing and road-tax fees. A toll system could work as long as it didn't unduly interfere with interstate (and intrastate) commerce; you'd at least need a government agency to ensure equal access.

> Military liberation of foreign countries could be paid for by their treasuries.

As I believe the purpose of the US military is to defend our country against our enemies, that's not a very good way to pay for things (IMO.)

>Where that doesn't work take the budget, subtract government income
>from other sources, divide the resulting quantity by the number of able
> bodied individuals, and send everyone an annual bill for their entire
> share.

Thus putting many poor people in debtor's prison, where they _use_ taxpayer money to just sit there and do nothing. Who will pay for the jails, the guards, the judges? A very bad idea.

>I think support for a large government spending lots of money would
>disappear once people were paying for their share of the government
>and had to deal with the yearly total all at once.

Often I do have to pay my yearly total either at once or in four installments; at times they have been massive payments (although they do not represent 100% of my taxes.) I still think NASA is a good idea.

[MarkM 0]

I like the idea of a national sales tax. Rich people buy bigger and more toys so they'll spend more in taxes.

Just don't tax stuff like food. I know some states do that and even exempt books from a sales tax too.

I'd be suprised if something like this would get passed though. There are too many companies that depend on the current system and they'd lobby pretty hard to keep it like it is.

[gmanpilot 0]

I would be interested to see the results of a three-fold, transparent mixture of user taxes, a flat earned-income tax, and a flat national sales tax on all goods and services (with the only exemptions being on food and medicine). No deductions of any kind, no tax shelters, no tax on interest income or capital gains, no estate tax, fewer laws, fewer lawyers, fewer lobbyists, fewer special interests. Everyone pays their per-capita fair share.

_________________________________________
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[PhillyKev 0]

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I think that if there's a buck to be made without being taxed, then people will not horde the money - they'll invest it.

Right, that's what I mean. Investing instead of spending. Sticking with only a sales tax will allow accumulation of wealth to go unchecked. If you make a million a year, spend 200k and invest the rest, that's a whole lot of interest you'll be accruing on money that's not being spent. Yes, when it's invested in stocks, etc. it will help boost the economy, but what if it's invested in foreign stocks? Also, it smacks of overtaxation of the poor in that if you have to spend every dollar you make to survive, then you're paying tax on all your money, whereas the millionaire is only paying tax on a fifth of their money.

I'm not proposing that you tax the entire amount of excess income that they invest, just any gains from that investment (offset by losses of course).