I've always toyed with the idea of a consumption based tax. Where instead of having a tax based on what you make, it's what you spend. Admittedly some won't be taxed at all, but would it be viable to have a higher flat tax (and extra taxes) on all goods, property and such and eliminate Income tax in the US? Of course the tax would have to be higher for everything (think 10-20%) but there would be less bureaucracy, the IRS would essentially be gone (think about it, only businesses report and send in taxes) and there's less lost paperwork. Not to mention more money to spend, although the tax is higher, the fact that you have more income offsets it. Basically it's the FairTax Idea.
The issue here though is that it makes sense. Our elected officials would never accept an idea like that! [ontopic] I agree with you here. The way I have seen it implemented best is, No tax on unprepared food and basic necessities, items, not including a house or medical treatment, over X amount (think $50,000) taxed at a higher rate. State and local govts are then funded through property taxes.
The issue is getting people to realize that a 25% flat tax for everything (or even a 15%) isn't necessarily bad if you don't have to pay income tax.
Mmm don't agree it would be a tax to penalise the poor. As they would use a greater volume of their income to get by on so have less in return thus a great tax deficite. As a high income earner would effictively use a smaller portion of his income, leaving the rest to go untaxed and earn more interest. Compare a house hold with a 3000 blat income a month to one with 10,000 both can live on the same budget yet the lower earner will be hardest hit
Not necessarily if we tax luxuries higher. That included with the fact that some items won't be taxed at all (water, uncooked foods). There would have to be a fine balance, but as long as the current sales tax rate is slightly increased for basic items, and luxuries are taxed slightly higher..
I see a fair few issues with this. As you can imagine, income tax receipts generate a fortune for the Treasury, and its naive to think you could eliminate income tax with this tax. Most EU countries have 20% VAT and then income tax on top. I can see manufacturers and retailers having a fit as their goods become dramatically more expensive. Lastly, this would be a very unfair tax. A man earning $200,000 spends less of his income as a percentage than someone earning $20,000. This tax would be regressive and unfair. The US tried a similar thing with the Bush tax cuts which gave substantial tax cuts to people who did not need them and caused massive increases in the deficit for very little benefit.
Hmm, in that case then we'd have to include income tax... Mind you this was a very abstract idea, I saw the potential issues (that being what exactly should be taxed and what not. Also the issue of low income taxing.) and I have yet to really find a solution. And online purchases are only tax free if it's out of state. I was thinking more in terms of a hybrid, one where income tax is reduced and there's a flat national sales tax. Thus far, income taxes does still work, but the whole sales tax fiasco (county based) makes things unnecessarily difficult.
Us brits pay tax on almost everything ie income tax, council tax, VAT, stamp duty on the purchase of a property... tax on fuel, tax on alcohol and cigarettes...
The UK and most other European countries do this with the Value Added Tax. It does mean less bureaucracy for customers, but businesses have to put in more work themselves to administer such a tax. Why? Because, in order to avoid having VAT levied multiple times on an item or service during its production lifecycle (e.g. taxing grain before it is ground into flour, taxing flour before it is baked into bread and then taxing the bread) you need a system where businesses can claim VAT refunds on items they purchase in order to produce the goods they sell. Of course, you'd need to exempt necessities like food (so the bread example above wouldn't apply, but it does serve as a good illustration), water, electricity and heating fuel. However you also then have more bureaucracy involved in deciding what should be covered or exempted - such as the Jaffa Cake case where a particular confection was ruled to be a cake (and exempt from VAT) rather than a biscuit. So you'd still need the IRS to police the system (VAT fraud is a big problem in the UK) and businesses would have to increase prices by more than the VAT rate to cover the extra work they do.
Meh, what if you live in a state with a low sales tax? You're getting boned compared to someone living in a higher sales tax
Flat national sales tax would potentially solve this problem. A much simpler solution, fix the damn income tax brackets, dunno why bush's wealthy tax reductions existed in the first place.
It's fair because, keeping things pretty theoretical, the man earning $200,000 will a) be buying more goods and therefore be paying more in taxes and b) be buying luxury goods which are taxed higher than necessities. The basic goods which the poor person would be buying shouldn't be taxed so the percentage of income lost to taxes should be lower. Unfortunately, things fall apart when that pesky rich person decides to save his money instead and that pesky poor person keeps wanting "luxury goods". On a side note, I've always found it funny when people call sales tax "unfair". Any two people buying the same item will be taxed the same regardless of color, sex, age, income, etc. Isn't that the epitome of fair? And with income tax, those who are successful are charged more taxes in order to fund services which they are less likely to use, isn't that unfair? Sometimes things such as income taxes which charge the rich more are what we need to keep the rich from getting richer and poor from getting poorer, and that's fine, just not sure if "fair" is the right word for them, more like "necessary" or "humanitarian".
I believe a system based on taxing earnings would be fairer, as already mentioned the cost of basic living is the same for the rich as it is for the poor. No system will be perfect, however if everyone payed a percentage of their earnings fairly there would be no need for any additional taxation.
Rich people, as in say people worth millions of dollars or more, have the entirely legal option of living the high life, whilst paying zero tax. Nada, bubkis, zilch.
It is unfair because it doesn't tax the richer more than the poor ones - that it their logic. It is stupid, but looks like it makes sense to the people who think that.
That logic is only applicable if you bought the same things as a rich person, or if a rich person bought the same things as you. Which is entirely false unless you are a cheapskate (or bad with your money).
I don't say it's my logic. It is the logic of people who usually vote on left side of political spectrum (labour parties, social democracy). They see people who are not poor (middle class and rich people) as enemy and if they could, they would tax everything out of them, because they dare to have higher salary and higher life standard.
It's unfair, because the richest people do not have to pay any income tax, nor any tax on many if not most purchases, especially the most expensive and extravagant ones, such as luxury sports cars, private jets, hotels, restaurants, celebrity performances, etc.
The rich do actually have to pay for this, but the costs are usually subbed by the sponsors or in some cases considered tax deductible.
