I’m fed up with Bush’s idiotic tax policies. Now they want to replace income tax with a national sales tax. They’re spending out of control, taxing the wrong people, and Greenspan — who I used to greatly admire — has gotten all politic on us.
We in the state of Washington have had that for years. It doesn’t work. In the last election all the candidates were talking about going back to an income tax.
Having a consumption tax instead of sales tax increases the operations costs for businesses across the board. This is particularly hard on small businesses as they don’t have the huge gross income or investment reserves to support high these costs. I think most people agree that a thriving small business sector greatly improves the overall economy.
It hurts low income families the worst. Think of the family living paycheck to paycheck. They already don’t pay income tax because they don’t make enough. With a national consumption tax, everything now costs more. They aren’t making more, and their kids still need milk to drink and paper for school. These tax free savings accounts aren’t going to help nor incent because these folks didn’t have the money to save in the first place — they’re living paycheck to paycheck.
I don’t know why it’s so difficult to understand: If you want to have a prosperous country, make it really easy for your poor to become not poor. Then you have fewer poor and more not poor — isn’t that the very definition of prosperity? With more people moving out of the low income brackets, you have more customers to boost your economy. Same for businesses — make it really easy for people to get small businesses off the ground & profitable.
Dang. Somehow I don’t feel any better.
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November 22nd, 2005
by Dave Whitney
So I just picked up a book in the store and briefly thumbed through it. It was about abolishing the national income tax and replacing it with a point-of-consumer-sale-only sales tax. This tax would be on *everything* the consumer might pay for — food, clothes, doctor, etc. “But what about the poor people?” you ask. Their solution was to guess how much sales tax a person would be expected to pay for basic services during the year, and preemptively send them a check for that amount. So, at the cash register, they pay as much as everyone else, but they have the money to pay the taxes. Of course, this presumes the recipient is smart enough to save that money and use it to pay the taxes, instead of going out and buying a new TV. It also presumes the government’s guess is correct (or at least “fair”).
They also argued that since operational costs for businesses would go down (no more business income tax, no more inventory sales tax), they could also lower prices by approximately the same amount they’d go up because of the new sales tax. The end result is product would remain mostly the same price at the register, while everyone’s paychecks would all go up (no more income withholding). The end result is at the end of the year, you still have the same amount of money (since it wasn’t withheld, but you paid this outrageous sales tax instead) AND you don’t have to go insane filling out your 1040.
I think the idea is generally very flawed — it assumes the high-income people will spend spend spend, making up for all the income tax they’re no longer paying. Doesn’t seem likely. However, it appeals a great deal to folks who make a whole lot more than they spend, which account for a whole lot of people in this country, so it stands a fair chance of being implemented.