[Denny]

On the surface, I like Mike Huckabee's proposal to get rid of income tax and go with a sweeping 23% sales tax instead. The overhead of running the IRS is a big burden ad by piggybacking in most cases on the existing state level sales tax collection mechanisms it would be possible to simplify things a lot.

Also, philosophically, I like the idea of taxing consumption rather than earning, it fits into a conserving society ethic. It would go a long way to encourage people to repair what they have, rather than buy new. I am surprised at work, how many people I know seem to toss decent things out, rather than fixing them. It seems like a whole new generation has lost their mechanical and electrical know how.

Now, the downside. I don't see how Huckabee has thought this whole thing through.

He talks of a rebate mechanism based on incomes. But, wouldn't that imply you'd need the similar reporting and auditing mechanism the IRS now provides to dtgermoie who qualified? Would it be better to isolate food and rent and transit purchases from the sales tax, instead of getting into the whole complexity of the rebate mechanism to take care of the low income people?

Also, what about land transactions. Real estate is not consumed. Some people have jobs which require them to move periodically. So, if over my worklife, I had to move 10 times, and another person keeps their original home their lifetime, why should I have to pay 23% on each real estate transaction? That could be a huge impact to a person who moves frequently.

What about the free trade agreement? If the U.S. levied this 23% tax, would there not be many shopping expeditions south or north of the border? And, these days, its so easy to buy on the internet, and so there would have to be a very stringent tax collection system installed at the point of entry for mail and shipped goods.

[roccman]

expect both

[FoolYap]

$this->bbcode_second_pass_quote('Denny', 'A')lso, philosophically, I like the idea of taxing consumption rather than earning, it fits into a conserving society ethic. It would go a long way to encourage people to repair what they have, rather than buy new. I am surprised at work, how many people I know seem to toss decent things out, rather than fixing them. It seems like a whole new generation has lost their mechanical and electrical know how.

[Lumpy]

I have not thought this through from start to finish (all the ramifications, etc) ... and I certainly am less educated in economics and politics than many others here on the boards.

But in a nutshell, I like the idea of a consumption tax.

If I don't want to (or, more to the point, CAN'T) pay $1230 for a watch, I won't buy a $1000 watch. (23% tax, right?)

Lumpy

[mekrob]

$this->bbcode_second_pass_quote('', '
')I think it's DOA. For one, it sounds regressive (taxes the poor more heavily as a percentage than the wealthy), so it won't win much support from progressives.

[Kingcoal]

Well, believe it or not, the income tax was originally sold as a way to tax the rich. The income tax was sold to the American people as a tax on people with incomes over $300K/yr. Back then, that was a lot of money - it's still a very nice income. Anyone under that amount wasn't affected by the original income tax and didn't have to file.

Why today, does a single mother working a menial job have to pay the income tax? The tax table was moved lower and lower over the years, particularly during WW2 to help pay for the war. The tables were left that way after WW2, particularly because people didn't bother to notice. Since then, inflation has made people “richer” the point where fast food workers have to pay. It's a great system for the government; they can raise taxes simply by depreciating the currency and nobody notices. Those in the know, who understand things are generally so enfranchised in the system, they don't care. Meanwhile, millions of poor Americans are treated like rich people by the tax system. Worse, the system is so complicated that those with little economic activity (investments, etc) generally find themselves with few deductions. The system favors those with mobile liquidity, i.e., people who can “tax plan” their way out of being taxed. The lowly menial worker with little money is taxed at a confiscatory level.

The national sales tax idea is really not a bad one in theory. First off, it's an excise tax, which is a type of tax that can be enforced without bumping into the Constitution at every turn. Collections would be the responsibility of the seller which would vastly reduce the burden on agencies such as the IRS. It's a tax on commerce, specifically consumption and seems like the right medicine for the economy the way it stands. One of the cons is that it would expand the black market economy, but I really don't think that it would get out of hand.

I highly doubt that this sort of sweeping change is possible however. Can you imagine the pressure from retailers such as Walmart. They would be threatening to lay off thousands, etc. Another faction would be the rest of the world. The income tax is actually part of a treaty which the US signed with Britain and others. America would be sued for trade infractions because the excise amounts to a huge tariff on foreign goods. However, I think that since it is a tax on all commerce, foreign or domestic, the US could slip past that.

Personally, I think it's a great idea. Americans would consume less and it would be a great shot in the arm for the repair business. Suddenly, it might be more cost effective to repair that TV or microwave rather than buy a new one. The tax would push people into a much less wasteful mindset. It's easy to implement, much less regressive and would chip away at the deficit. Poor people who don’t live extravagantly would find they have little tax burden. Most essential commodities like food wouldn’t be taxed. I don't agree with several of the plans being touted however. They have a tax credit offered to people who qualify and that just derails the whole thing IMO. I think that we should get away from the government sending checks to private citizens. People need to go back to living without government intervention in the personal lives. The government can’t afford it and it gives people an entitlement complex.

[cat]

It seems to me it would hurt the middle class the most. It would have little effect on the wealthy, and little effect on the poor (if they are excluded), but the middle class would carry the burden - kind of like a flat-tax with the poor removed from the equation. I also don't see how it would be able to cover the costs of our government.

I'm not sure that it alone would reduce consumerism, people would be keeping what they ordinarilly would pay in income tax, and as long as they have extra money, or access to credit they would still want those plasma scree TV's, designer purses, ect.

Denny, your location says Canada? How do you see your tax system differing from ours? Is the CRA about equal to the IRS, or is it a simpler system?

[Denny]

$this->bbcode_second_pass_quote('FoolYap', '
')
Many things aren't really built to be repairable, these days. (A consequence of the chase to the price-bottom, I suppose.) Or if they are repairable, the parts can cost a significant fraction (sometimes uncomfortably close to 100%) of the replacement cost.

But more importantly, how warm do you think the services and industrial lobbies are going to be to a proposal to put a tax on consumption? Domestic consumption's a key leg of the U.S. economy, and we're all supposed to be good little consumers and buy, buy, buy.

On the one hand, I personally don't have a problem with trying to encourage people not to consume as mindlessly as they have been. But I'd need to see details. And I'd need to see things like food and clothing be exempt from it before I could support it, because everyone needs to eat and be clothed.

--Steve

[wisconsin_cur]

Another issue is all those poor folks who saved. Imagine I saved all of my life and had a 1 million dollar nest egg. Paid income taxes on that 1 mill. now I get to pay taxes when I spend it.

As it is if it ever looks like Huckabee (or the idea under another patron) has any kind of a chance, I am going to go out and buy the last couple off large purchases that I see the need for. (ten acres, barn etc)... I'd rather buy it before the price goes up and pay for it on my tax lilberated income.

What kind of recession would such a change bring (I know it is the least of our problems but this is the kind of argument that would come up) when all of the sudden people start consuming less.

Also, are they going to pay individuals to snitch on their neighbors selling eggs or hay but not reporting it?

Would we have a rebirth of barter as I would rather trade eggs for hay with one neighbor than be bothered to collect or pay the extra taxes.

[NeoLotus]

$this->bbcode_second_pass_quote('FoolYap', '
')On the one hand, I personally don't have a problem with trying to encourage people not to consume as mindlessly as they have been. But I'd need to see details. And I'd need to see things like food and clothing be exempt from it before I could support it, because everyone needs to eat and be clothed.

--Steve

[Niagara]

How much of the 23% sales tax would actually get collected and remitted to the guvmint?

Don't you think this would create a huge "under-the-table" economy?

When Canada introduced its 7% GST back in 1991, the cheating and fraud that took place was staggering. Much cheating still takes place.

[Alcassin]

@NeoLotus

$this->bbcode_second_pass_quote('', '
')I have to agree with this. I also agree with the poster who mentioned that income taxes were at first designed to tax the rich and not the average worker. And now the AMT (alternative minimum tax) is beginning to hit people it was never meant to because no adjustment for inflation has been taken into account.

Perhaps what we need is to classify goods into "basic" and "luxury" categories. Basic goods don't get taxed but luxury items got whopped.

The real problem however, is that the rich are fewer in number and don't spend as much on "goods" as the vast majority of workers in terms of percentage of total population. Most of their money goes into "investments" rather than "purchases." So, the idea of taxing "consumption" doesn't really do anything to except take more away from people who can least afford it.

[FoolYap]

$this->bbcode_second_pass_quote('Denny', 'S')teve, I agree that a lot of stuff s not built to ever be repaired, but some can be. An example is my brother-in-law who discarded his VCR because it got jammed up, I picked it up and disassembled it to clean it out and cleaned the heads, etc., I don't think I spent more than an hour and 15 minutes. He found it easier somehow to part with $60 for a new one. Even if he did not have the tools, he could have spent about $6 at a dollar store and picked up what he needed. He just was not motivated. Maybe if he had to pay $80 for a new VCR he would be. I think too many people are lazy these days, they'd rather relax or socialize than get down to work.

[Tyler_JC]

And what happens to all of the special industries that exist only because of tax credits?

What happens to the wind and solar energy businesses if they lose their tax protections?

How are you going to afford a mortgage without the mortgage interest tax credit?

And biggest of all, who the heck is going to buy municipal bonds?

The fair tax would absolutley DESTROY the municipal bond market.

[cat]

Here is Salons take: http://www.salon.com/opinion/feature/20 ... on/feature

[evilgenius]

The argument surrounding this issue isn't really one of tax but of man's realtionship to society. Are we individuals or members? The individuals seem to come down on the side of not paying much or any tax because why should they pay for the upkeep of others. The members like the idea of anything which makes the rich hold up the rest of the structure. Neither side is wholly correct, but neither enjoys compromise either.

What you need is to secure the ability to manipulate spending (both to increase or decrease it) if you are looking at this issue from the point of view of an economist. Individualists (monetarists) would like to do this by sticking it to the little guy by means of an increase in taxes through taxing consumption or fiddling with the lower brackets of the tax structure. Members (mostly Keynesians) would like to see the ability to increase demand brought about by lowering taxes along with decreasing interest rates. Keynesians would see the argument in the number of goods that could be bought, in general demand. So, how many big screen tvs can a rich man buy vs say twenty five poor guys. How much is the economy really bosltered by allowing the rich to simply keep money and not put it into action. By the same token, if you have a lot of competition, the margins don't allow for high taxes. Taxes are not like a fee paid on a trade that is pretty steep on a small size transaction but inconsequential when dealing with millions. Taxes are a percentage and, hence, sting no matter the level of spending.

What you need is a combination that allows for both. I say keep the income tax system with its brackets slightly modified and introduce a 1 or 2 percent nationwide sales tax to fill in the void. That type of thing would truly allow those desirous of wealth preservation a chance to save whilst trying those responsible for over consumption according to their over consumption. Right now it seems there are some pretty good intentions but people are limited by too few tools.

[gampy]

For me personally, I would prefer a higher sales tax, and increased duties, as opposed to income taxes.

It is fairer I believe. It gives the individual a choice, of sorts. Want to live the good life? You pay more in tax. Those who make more money usually buy more stuff, so if you are middle-class and above, you wind up paying the majority of taxes.

Those who feel that this would slow the economy, by reducing the retail, auto, and housing market consumption, need to understand that reduced corporate tax would offset much of the demand destruction that a higher sales tax would incur. I think it's a fair way to balance the tax burden in my opinion.

In Canada, certain goods are exempt from sales tax...food stuffs, and pharmaceuticals. Done correctly, I can see a much simpler form of taxation. Less loopholes, less bureaucracy.

Of course, I can certain sectors of the economy trying to stop this, but it's a fair way I think overall. I guess Huckabee is taking a page from Ron Paul's playbook. He might gain some lower middle class votes because of it.

[cat]

Personally, this sort of tax would be very good for my family. I came up with a rough estimate, and at 30% sales tax, we would have saved about $70,000 this year and that is being very conservative.

I don't consider myself wealthy - we must work, however, we probably earn above what most middle income Americans do, thus I think that people with income levels lower than mine would probably take more of the hit.

[heroineworshipper]

This was tried & failed in 2005.

Hillary would make everything 23%. 23% sales tax, 23% social security tax, 23% medicare tax, 23% universal retirement tax, 23% universal healthcare tax, 23% income tax, 23% Hillary pyramid tax.

[cube]

$this->bbcode_second_pass_quote('Tyler_JC', 'A')nd what happens to all of the special industries that exist only because of tax credits?