Fair Taxation

[Caligastia]

What's up with this consumption tax idea? Ive read an overview of it, but it seems too good to be true. Can it really work the way they say it will? How can the govt remain fully funded while we pay less tax?

http://www.fairtaxvolunteer.org/smart/sketch.html

[Sava]

It will work. After Bush cuts all programs that help middle America and the poor.

[Zkribbler]

Ah ha. The old Value-Added Tax, a.k.a. national sales tax, has surfaced again!

It works this way, the lower and middle classes spend a greater percent of their income on consumer goods than do the wealthy (who, of course, pay most of the income tax, all of the estate tax, etc). Thus, if the VAT were to replace the income tax [etc], the result would be a massive shifting of the tax burden from the rich onto those who are least able to afford it.

[MRT144]

no one needs to reply to refute what zkribble stated...its true. i never thought id see republicans trying to increase the tax base...

[Starchild]

23% VAT?! Federal sales tax in Canada is 8% (with the Provinces levying their own taxes. In Ontario, we paid a total of 15% sales tax). In the UK, VAT is 17.5%. Then again, we also have income taxes....

[Flubber]

Well I can point out a few things since I come from a place with a 7 % consumption tax ( the GST)

-- a 23% premium on new homes versus existing will be a HUGE disincentive on new home construction- Here they actually give a rebate of about half the GST (up to 350,000 home cost IIRC) to lessen this disincentive

-- If something is revenue neutral compared to the existing system, it is self evident to say that the same amount of tax is being paid overall-- it is just redistributing who pays. This may be good or bad depending on the system and your personal point of view. It would seem to discriminate in favor of those that already have acquired their major assets

-- This again seems like it would be toughest on the middle class, who make enough to not be exempt but are not rich enough to find ways around things

-- The rich may "consume" things in other places and in fact will have an incentive to do so ( unless the proponent is right and prices drop when people are no longer paying " the hidden income tax cost of goods).

-- Some rich people could avoid taxation entirely by earning income in the US and spending it elsewhere

-- Administration of consumption taxes is never easy . Imagine I buy wheat and other items (taxed) to make and sell flour ( taxed) which is then made into and sold as a cake ( taxed again). Since the cost at each stage must include the taxes paid, this can lead to astronomical prices. Imagine a product that goes through 7 or 8 stages before its finished-- the price could double or triple if the tax is appplied to the full value of the good each time it is "consumed". To avoid this you need to account for input tax credits so that each good or service is only taxed once ( actually it is taxed several times but previous tax paid is credited back). Compliance on this issue is a major problem in Canada


-- Overall it seems thay paint too rosy a picture-- prices will drop, compliance will increase, even interest rates will go down etc without much in the way of support for the argument.

[Sava]

but double taxation of corporate dividends of the rich are unfair

[Buck Birdseed]

Yes, let's replace progressive taxation with regressive taxation. Great idea. We can switch back to feudalism next!

[Az]

cancel the income tax?

holy ****....



anyway, didn't you have VAT before that?

[DanS]

It's not just a question of distribution of the burden. Some burdens allow more economic growth than others, even though they might be the same value. Extra economic growth increases the tax base for the future and makes us all better off, which is highly desirable.

Thus, if the VAT were to replace the income tax [etc], the result would be a massive shifting of the tax burden from the rich onto those who are least able to afford it.

Not necessarily true. As stated above, there can be offsets paid by the government to lower income individuals.

[Dinner]

Even the Bushies couldn't hoodwink people into going along with this regressive plot.

[DuncanK]

I support wealth tax. Consumption tax is a gimic and evil.

[Buck Birdseed]

Hell-o Robert Nozick!

[DuncanK]

DanS,

Sure if you believe in trickle down economics. I don't think many people do.

edit: who is proposing this ofset? That might be a good idea. I haven't thought about it.

[David Floyd]

Yes, let's replace progressive taxation with regressive taxation.

Sounds like someone needs a dictionary.

Regressive taxes would mean that the rich are taxed at a lower percentage than the poor. These are equal taxes, and although they are still unfair, at least this way everyone is getting screwed equally, instead of the poor and middle class making out at the expense of the upper class.