The Washington Post writes that a national sales tax, known in other countries as a value-added tax or VAT, is getting some attention in DC, even among Democrats, who traditionally don’t favor regressive taxing schemes. The article notes some pros and cons about a VAT, as well as the small problem that imposing a 25% sales tax on everything would be political suicide.
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Just so we are all clear: “Value added tax (VAT), or goods and services tax (GST) is a consumption tax levied on value added. In contrast to sales tax, VAT is neutral with respect to the number of passages that there are between the producer and the final consumer; where sales tax is levied on total value at each stage, the result is a cascade (downstream taxes levied on upstream taxes). A VAT is an indirect tax, in that the tax is collected from someone who does not bear the entire cost of the tax.” Source Wikipedia!
Of course we would have to amend the constitution first
Although I appreciate the vigorous debate that this story generated, I am disappointed that it has not touched on the introduction of Tax Dog and his superiority/inferiority to Tax Cat.
Ok. Just to spell it out…25% is only acceptable if you remove:
1. Gasoline tax
2. All sin taxes
3. Property tax (County tax school,city, college, hospital)
4. Income tax (federal, state, and city)
5. Sales tax (state and city)
probelm as i see it is the switch over a VAT in place of the current system is fine but it kicks savers in the balls. Lets says this switch over happens i have 20k in the bank that was my savings after the current taxes. i spend the money after the switch over and guss what i just lost 30 % of the buying power of that money. A credit system whould have to be put in place for middle class people not to louse there nest eggs and revolt but any system would be abused to hell by others.
Transferring some or all of our tax burden to a sales tax system rather than an income tax system would be great for most middle income tax-paying people who seem to shoulder an unfair burden of the costs of running this country.
Rich people find all sorts of loopholes for their income tax, but would pay more fairly if they were taxed on what they spend instead of what they earned.
Plus, there are tons of regular people who don’t pay their fair share. Most servers, bartenders, hairdressers, etc. do not claim anywhere near all of their tip income. Some larger chains require the waitstaff to claim a certain percentage of sales, but in every restaurant I’ve ever worked, less than half the actual tip money is reported.
Then there are the tons of people who work for cash “under the table”. I know one person who tried to justify it by saying that he could charge homeowners less because he doesn’t pay taxes. Well, that’s good for him, good for the homeowner, but what about the rest of us who are paying his taxes?
With a sales tax system, even the drug dealers would pay their fair share. As long as it would eliminate income tax, I would happily vote for a 25% federal sales tax.
a flat tax such as this actually makes a lot of sense, but you have to did deeper into our current tax system. In order to successfully implement a tax reform such as this, all other taxes must be taken off of the books. the figure of 25% comes from adding each persons’ income tax to the average sales tax, as well as all of the corporate taxes that are added into the price of products. Remeber, when a company has to pay a tax there is no individual to fork up that money. The tax is either pushed one of two places, decreasing returns to the investor( bad for the investor) or increasing prices to the consumer (bad for everyone). So while the receipt doesn’t show an actual tax, taxes are embedded into the price.
There are also two more major points. First is to look in the last ten years at how many companies have moved their headquarters out of the U.S. to escape the tax code. A flat tax can bring them back in and increase money into our economy. Secondly look at underground criminals such as drug dealer. They don’t report and pay their income taxes but under a flat tax every time they buy food or gas, they are contributing just as much as everyone.No matter how they make their money.
To even begin to make such a tax “fair” you would have to add tons of exemptions for food, medicine, bandages, soap, shampoo, school supplies, clothing, etc.
Why not just start at the other end of things and add/increase a luxury sales tax on things like mp3 players, cars (over $20,000,) etc.
@esc27: I don’t see any reason to add any exemptions. Poor people spend less, pay less. Rich people spend more, pay more. Seems pretty fair to me.
Perhaps unprocessed foods (like fruits and vegetables) and medicine should be exempt, but nothing else.
By herding in all of the people that are currently not currently paying any taxes at all, either through loopholes or by working under the table, the tax burden is reduced for all of us – even the poor.
As seen in this video…