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Thread: A National Sales Tax?

  1. #1

    Question A National Sales Tax?

    This subject came up briefly on CNN news today, and I only caught a piece of it, not enough to know what was being said. Looking it up on the web I found it was actually considered some time back, though it's the first I've heard of such a proposal. Wish I would have heard what was said today, whether it's being seriously considered for the US in the near future.

    Life under a national sales tax - Mar. 15, 2005

    Looking over some of the major components, it appears to have some good points and bad points as I would expect. Haven't really delved into it in enough detail to decide whether I'd consider it superior to the current taxing method, enough so to be worthwhile in making the switch.

    Now this is where you can educate me a little on the international scale when it comes to govt. taxes. Do a large number of other countries have such a national sales tax on goods and services in place of a govt. (income)tax automatically taken out of your pay, and in which you have to file forms annually for reconciliation? Does the system work pretty well if it's used in your country? Is the VAT in the United Kingdom a national sales tax of some kind?

    I remember buying a pram from an online retailer in the UK. Since I lived in the states she deducted the VAT, which was pre-figured into the prices shown on her website. That deduction saved me about $150 after converting from GBPs. People I know who have visited, and purchased items in the UK, paid the VAT, but got it credited back when they left the country. That's why I was assuming it was some type of national sales tax, but not sure if it completely replaced an income based tax.

    Appreciate hearing from members in other countries that have national sales taxes in lieu of taxes based on income. Or even comments about whether you feel such a tax would work well in the US. I believe there was a thread about taxes a few months back discussing flat rate and other types of tax scales, but don't recall it touching on this particular tax proposal.

    ~Pramrider

  2. #2

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    In Canada, we're lucky enough to have both! In addition to having our income taxed, we also pay a federal tax (General Sales Tax or GST) and a provincial sales tax (PST) or just about everything.

    From reading the article, a flat federal tax in lieu of income tax doesn't look like it would work. Especially for younger members of society, who aren't taxed on income anyway, that makes the Wii that much more unattainable.

  3. #3

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    Perhapps a reconsidered luxary tax; perhapps considering a minor tax on entertainment based products like movies, music, video games, large HD screens, rediculous computer systems. How much more money would the government have to work with if they put a one cent tax on each of these items?

  4. #4

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    This can be labeled as class warfare since the rich will surely pay more then the poor. Why does a rich person HAVE to pay more then a poor person greedy or not? Why can't we all just pay the exact same amount NOT percentage wise but amount wise?

  5. #5

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    Quote Originally Posted by Fire2box View Post
    This can be labeled as class warfare since the rich will surely pay more then the poor. Why does a rich person HAVE to pay more then a poor person greedy or not? Why can't we all just pay the exact same amount NOT percentage wise but amount wise?
    Because rich people almost always cost the government more if their wealth is not regulated and tempered. For example, it certainly wasn't the poor that caused the recent credit crisis. Nor was it the poor that caused the French Revolution. Poor people don't buy slaves, or subjugate entire nation's as colonies. The poor don't create oligarchies, and the poor rarely institutionalize mass murder. The poor are too poor to influence the lives of thousands or millions, and for that privilege the rich must pay a high price and be held accountable. In return they get great power and the means to create much more wealth, but only if that wealth spreads to all those beneath them. It is a fair trade.

    But ignoring that, a flat tax means the neither the poor nor rich effectively pay taxes. The poor have no money to pay, and for the rich a flat tax is insignificant. This places 99.9% of the country's financial burdens on the middle class, ensuring most of them steadily become poorer. That means government income dwindles, putting the population at the mercy of a few ultra-rich oligarchs. If you're worried about class warfare, then why would you want a country where you're either very rich or very poor? Personally, I want a tax regime that encourages and broadens the middle class. Sure it means a small number of people do not become rich, but it also means a great many do not become destitute. Having few poor is far more valuable than having a slightly larger but still tiny number of wealthy people. Progressive tax regimes that are proportional to income do this, absolute flat taxes do not. As an added bonus, they automatically account for inflation as well.
    Last edited by IncompleteDude; 21-Oct-2008 at 04:49.

  6. #6

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    The idea sounds nice in some ways, but I don't think it would work well in the US. In an economy that's already slumping, it would do a lot to discourage consumption. And, people talk about it like it would be a pretty small percentage.. but I'm not so sure about that. What if on everything you bought there was a 20% federal sales tax? When you add in the state and local sales taxes, I'd be paying 27% sales tax. Imagine buying a car, and then having to fork out 4-5G in taxes on it.

    The other problem is that it's essentially a regressive tax model. There are certain basic necessities that everyone, rich or poor, needs. But, no matter your means, you pay the same tax. Some of the proposals include a "tax prebate" where the government sends you money if you make less than a certain amount every year to cover a certain portion of the tax. I think that's asking for abuse, and it'll be complex, and one of the major pushes for this system is that it's simple.

    Another issue is e-commerce. Right now if you buy something across state lines you pay no sales tax. Under such a system, all such transactions would be taxed. At least, the ones within the country would be.

    The main pro that i hear, and which I happen to think is greatly exaggerated, is that everyone pays the taxes -- drug dealers, prostitutes, illegal immigrants.. and anyone who is illegally employed or doesn't report income. While this is a nice idea, I don't think it will really have a huge impact.

  7. #7

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    The problem with a National, or any, Sales tax is that people that shouldn't be paying taxes are stuck paying them. The money that kids make mowing lawns, or shoveling snow is taxed, Birthday money is taxed, other money like this is taxed.

    The other problem is that for the most part people with lower incomes will end up paying a higher percentage of their income in taxes than someone that is rich. The rich pay more money, they buy more stuff, but they also buy things that are untaxed; stocks, bonds, CDs, other investments and savings things that aren't really purchases.

  8. #8

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    Quote Originally Posted by Fire2box View Post
    This can be labeled as class warfare since the rich will surely pay more then the poor. Why does a rich person HAVE to pay more then a poor person greedy or not? Why can't we all just pay the exact same amount NOT percentage wise but amount wise?
    That's like saying a four-course meal at a five-star restaurant is just as good as a McDonalds hamburger.

  9. #9

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    Quote Originally Posted by chevre View Post
    The other problem is that it's essentially a regressive tax model. There are certain basic necessities that everyone, rich or poor, needs. But, no matter your means, you pay the same tax. Some of the proposals include a "tax prebate" where the government sends you money if you make less than a certain amount every year to cover a certain portion of the tax. I think that's asking for abuse, and it'll be complex, and one of the major pushes for this system is that it's simple.
    In Canada, everyone who has less than a taxable amount of income gets a quarterly GST rebate. It amounts to about $250/year, and is the same for everyone. The amount is based on the average GST costs of a low income individual, so it changes with inflation and the economy. It's really not complex and not enough money to be worth abusing.

    Also, basic necessities like groceries are sales tax exempt for everyone.



    Quote Originally Posted by Valentine View Post
    The problem with a National, or any, Sales tax is that people that shouldn't be paying taxes are stuck paying them. The money that kids make mowing lawns, or shoveling snow is taxed, Birthday money is taxed, other money like this is taxed.
    No one pays any taxes on those kinds of things in Canada, not even income taxes. That kind of income is cash only, so generally unreported and "under the table". No one bothers reporting it, and it's not enough money for the tax man to care about.

    But even if you wanted to, it's usually impossible for a lone kid mowing lawns to charge or pay sales tax. To do so, you have to register a company and open a GST/PST account with the government. Then you have to go through some forms in your income/corporate tax filing, write a cheque to the government, and pay the GST. Since no kid would or is even capable of doing all that, they will never pay, and that's fine. I seriously doubt if it's even illegal, there's surely an exemption for those kinds of informal exchanges.

    However, I will say this, GST is a regressive tax regime. To the rich it is a pretty insignificant fee. At the same time, it does discourage one from making frivolous purchases, since it only applies to non-basic goods. It makes you think about the value of your dollar and makes you biased towards saving.

  10. #10

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    Incomplete Dude, you misunderstood me. Those people will start or are already paying taxes on their income every time they buy something.

    That is one of the big problems with the (un)FAIR Tax system.

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