Pull up a chair, let's talk national sales tax
Taxes. The advent of another belated spring just has to have its annoying balancing act, tax time. It can't just bring crisp 55 degree air and early blooms and open car windows and thoughts of golf, can it? Noooo, it has to tug taxes along for the ride. Annual party pooperage. Pfft.
Now that the lead-in requirement has been satisfied, I want to talk about this national sales tax concept. The complete lifting of the income tax in favor of a consumption tax could be revolutionary for this country. You can't really say with anything resembling certainty what would happen under a tax concept such as this, at least not until it starts happening.
No matter how refined your economics acumen, there's a reason that most economic concepts have equally brilliant people on both sides of the Pros and Cons, arguing convincingly about why a consumption tax would be disastrous or universally beneficial and ultimately the fairest system. I just want to hear the ideas. It's damn interesting, that's for sure. Tax my car purchase (more). Tax my television. Tax that new set of golf clubs. Just don't tax me, cuz that would be, you know, taxing. It'll never pass, at least not soon. A natural incentive for everyone to save more, or an open invitation to a whole new brand of frugality bordering on cheapness? All predictions aside, I think both sides, and even those on the fence, would agree that there are three inevitabilities. Positive inevitabilities:
- We'd save eight gazookazillion dollars in IRS documentation and bloat.
- It would cut off a major vein that has fed corruption and evasion, which the US estimates costs the tax roll about 5 or 6 gamookabillion dollars every year.
- We wouldn't have these annoying piles of paper on our desks every damn March.
I don't know, but it's interesting. And one other thing is for sure: the tax attorney lobby will spend nine kamikaquillion dollars lobbying against it. And that's serious money. That's nearly three yodabucks.
Seriously though...I'd like to talk about this. Do you like what this would mean for you, do you think it's a fair spreading of the tax burden, and what do you think it would mean for the country over, say, a ten year span? I want opinions, baby. Supporting facts are a nice plus but not essential. Just imagine we're at a bar and you're inhaling the nut/chex mix as you 'splain your take on it.
Bored of that? Wanna see some interesting but slightly creepy art? Check out this guy's "age maps". He takes a photo of a person as a child and merges it ripped-photo style with that person's adult face. Here's a sample of the photographer himself:
This test should be a cinch for some, impossible for others. If you love Monty Python, this is as easy as the bridgekeeper's three questions. If you don't love Python, you'll have better luck with an all-essay exam on string theory.
Labels: politics
10 Comments:
I noticed that the golfing picture is very well-composed. It follows the rule of thirds and even has good diagonal composition. I imagine that it was cropped that way, but to whomever cropped it: Kudos.
As far as the taxing idea, I don't think it's a very fair spread of the tax burden. A sales tax is a regressive tax, just like vehicle license fees. When it's based on nothing but straight percentages, you can't take into account that a 30% tax on milk hits the poor much harder than it hits the wealthy -- the people who are arguably better able to shoulder the burden. The linked article addresses that at the end. I suppose you could counteract that, to a degree, with tax exemptions or something, but that would defeat the benefit of eliminating IRS bloat.
Further, would you adjust the tax for cost of living? San Franciscans and New Yorkers, for example, would pay more than their "fair" share of taxes where the gallon of milk is closer to $3.50 than, say, citizens of Indiana who pay closer to $2.30. As it is, I hate that I am taxed federally at a rate that is disproportionate to similarly-employed people in other parts of the country. My employer pays me so that I can afford the San Francisco rent, but the higher cost of living pushes me into the next tax bracket.
The tax break for the rich (home loan interest deductions) is something that should be eliminated entirely if it does not also become available to the poor (deductions for rent). The article mentioned that the sales tax would not apply to home purchases. Would it apply to rent? On a related note, the price that you payed for your home was inflated to incorporate the tax deduction benefits -- you can afford a higher home price because you can deduct the interest at the end of the year. Eliminating the IRS scheme would basically mean that the resale value of your home would drop by the accumulated lost tax benefit. I predict that the housing market would dip severely once the sales tax were signed into law -- good news for me, as someone who wants to buy in San Francisco.
Finally, what happens when the sales tax is insufficient to cover the budget? Raising the sales tax would effectively widen the gap between the poor and wealthy because the poor person's tax burden would increase severely whereas the wealthy person's tax burden would increase only marginally. When the tax rate increases to 100%, what then? For increases in the tax rate, I imagine that the poverty line would increase proportionally. While I agree that it would be more convenient, I disagree that it would be "fair", as the bill proponents have decided to call it.
Nugatory.
8:31 PM
Nugatory!
Reveal thineself, won'tcha? (Oh, C'mon!)
A friend of Brodie, perhaps?
RE: the pic of me golfing, yea that was just a crop. Thanks.
And thanks for the post. Interesting thoughts. I'll be curious to hear what my moneyman Dave K has to say about it, too. I hadn't thought about how it would affect the housing market. From waht I understand, there would have to be buffers in place for the lowest two or three tiers as we measure finances now, as well as the top two or three. I don't think anyone would propose a flat rate that applies to every state. That would be economic absurdity. There would be forumlas just as there are today, applied to our income. But it would all be handled at POS.
9:20 PM
I've been spinning this around my head for a few days so I haven't posted yet.
The US is one of the only countries in the world that doesn't use a form of "national sales tax" rather than marginal tax rates/brackets. There are other models out there that "work" - so it can be done.
If we look at the Canadian system, they have two taxes - sales tax and GST. I believe the sales tax is a function of local prices (so the $5.00 gallon of milk in Toronto is taxed more appropriately than the $2.00 gallon of milk in East BF, Yukon Territory). However, the GST is going to be the same based on how the government "prices" milk at the time. Toronto can have their cost of living premium and Yukon residents don't get screwed. And the governement still gets paid.
Remember, with no withholding from one's paycheck, you "should" have the money to pay the GST no problem.
Therefore, everyone should have "more" in their pockets to pay the GST and the states and local governments still get their incomes as well.
What I haven't figured out is that if my family is "well-compensated" and decides to turn the heat off and live off of Raman noodles for a year, how does the government make their money? Thankfully for the government, I'm married so this will never happen......
As far as the "tax break for the rich" regarding home purchases - both purchasing a home AND paying rent are outside of the sales tax structure. Your landlord does not charge you sales tax and they are not required to pay sales tax for rents received. I don't see this changing. Also, I do not believe that housing prices are "inflated" to accomodate the tax reduction one would receive from mortgage interest.
For example, what if I paid for a house with cash in full? I would be paying a "premium" on a benefit I would never see. Furthermore, as one buys a house, one should NEVER EVER EVER consider that a house is affordable because you'll get money back in a refund. It just doesn't work that way.
It's my opinion that the housing/rent markets are independent of the sales tax issue and therefore would not be affected at all.
Lastly, it is well known that the VAST majority of people spend according to their means (and Americans well over their means). Lower income individuals spend less, higher income individuals spend more. This is how the tax is supposed to work.
This would make my life so much easier in April......
10:59 AM
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10:59 AM
A couple of other things:
I think the milk example is a bad one to use. Again looking at Canada, I do not believe there is GST (goods and services tax) applied to food. However, if you are eating at a restaurant, you are taxed GST (for the service). In this way, no one (including "the poor") is/are being taxed on the essentials of food and shelter. Clothing is a good so that is subject to GST.
Also, 100% for me on the Monty Python test. I didn't fare so well on string theory though...
12:46 PM
well, with my 4/10 python score (whut...?), i guess i'd fare better on the string theory essay exam, especially seein as i read that damned brian greene book anyways. re: the sales tax thing, my gut feeling is that the federal gov. would lose too much revenue, given that it would have to be small enough so as to not completely freak out the "consumer." i'd also be afraid of it creating a stronger force toward retail giantry at the expense of diversity. i realize this is already underway and irreversible, but if there's a national sales tax on top of new york's already hefty take, the "consumer" might be even more inclined to shop at a place like try-n-save, where the sales tax wouldn't hurt as much.
4:39 PM
Python Score: 9. I missed the "all of the above" option and jumped all over "Lark's vomit" when I saw it.
Dave K: regarding "Never ever ever", I would be inclined to agree, in theory. In practice, however, "never ever ever" isn't really applicable. At least not in certain regions of the country. I worked with some very well paid engineers who resorted to the number-crunching Excel spreadsheets to figure out exactly what they could afford, incorporating the tax benefits as well as the note. Where the median home price is over $600K (and climbing), perhaps you can understand why they wring everything out of their finances in order to join the ranks of capital-building homeowners.
As far as your prediction of no negative impacts to the housing market, damn you! You've dashed my hopes.
Brandon: I know not this Brodie of whom you speak. In the interest of protecting my future job prospects, I will not reveal myself in any meaningful way.
11:46 PM
Fair enough, Nugatory. Said Brodie is my cousin, who also b lookin' for a house over yonder frisco. And hey, how didja come by thingy? (Need to determine if my search optimization efforts are paying off) and 2: Do you have one of these?
12:05 AM
By "one of these", I assume you mean a blog? Just created one last week, inspired by posting a comment on yours. http://nugatoryenfuego.blogspot.com
I came by thingy because, in a past life, I frequently visited the Incidentals at twogoons.com. Google sent me here when I searched for twogoons during a trip down memory lane.
12:47 AM
Ah, there's nothing quite like getting a "twogoons" hit, 5 years ex post facto.
Well I'm glad you found it and hope you'll come by often.
12:58 AM
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