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Arguments Against Flat or ConsumptionTax?
- Thread starter ktmexc20
- Start date
Consumption tax? Yep gotta agree it would tax the poor, and create too many exceptions.
Flat tax?
I think this could fly. The first 25k or so is not taxed at all, so not unfair to the poor. Then you tax ALL income over that figure at a flat rate, ZERO exceptions. Business decisions and home purchases would be based on the economics involved, period. No figuring how the Gov would help the bottom line. The home deduction would have to be phased out very gradually though as too many people have made long term purchases based on this.
Traditionally, the US has taken in about 19% of gross income regardless of tax rates (people will find alternatives or cheat if rates go too high). So say a 20% rate over 25k. Period. The savings from the IRS, and private accounting should add into the picture nicely as well.
The main problem with this in my opinion is that the States will then tack on their share. I believe most people would pay 20% without much trouble, but not anything over a quarter of income total.
That said, many people are paying WAY more than that now (Fed, FICA, & state). Many are paying much less through deductions, etc.
Jay
Flat tax?
I think this could fly. The first 25k or so is not taxed at all, so not unfair to the poor. Then you tax ALL income over that figure at a flat rate, ZERO exceptions. Business decisions and home purchases would be based on the economics involved, period. No figuring how the Gov would help the bottom line. The home deduction would have to be phased out very gradually though as too many people have made long term purchases based on this.
Traditionally, the US has taken in about 19% of gross income regardless of tax rates (people will find alternatives or cheat if rates go too high). So say a 20% rate over 25k. Period. The savings from the IRS, and private accounting should add into the picture nicely as well.
The main problem with this in my opinion is that the States will then tack on their share. I believe most people would pay 20% without much trouble, but not anything over a quarter of income total.
That said, many people are paying WAY more than that now (Fed, FICA, & state). Many are paying much less through deductions, etc.
Jay
Quote from Jayford:
Consumption tax? Yep gotta agree it would tax the poor, and create too many exceptions.
Jay
HUH? Is that logical?
You automatically dismiss the consumption tax because of the potential for too many exceptions.
Yet you blithely assume the same fate cannot befall the flat tax.
Does anybody else see the bias here?
Neither system will work if we allow politicians and lobbyists to tinker with the taxation method.
Don't mistake that potential as a flaw in the original concepts.
In other words use your brain.
Quote from Jayford:
Consumption tax? Yep gotta agree it would tax the poor, and create too many exceptions...."
They could and should exempt certain things where the lower incomes spend more of their money... necessities like food, medications, maybe something on utilities and rent.
But whatever they'd do, it should apply equally to everyone.
Quote from ddunbar:
Smilesync, you only addressed the consumption tax.
Too busy to address flat for now. Will get to it later, if I have the time.
In short, a flat tax is a better idea than a consumption tax. Not that I think either of them is better than what we have now, or that the current system is perfectly fine as is.
Quote from smilingsynic:
REASON FOUR: I didn't even get to the anti-progressive nature of the tax, but I'm tired of writing, so someone else do it.
Many people do not like progressive taxation and feel that they owe nothing to the poor. Why should what is basically religious morality be extended to the area of government and forced on people??
It would not be any harder to collect on a used car sale between individuals than it is now. Currently in California they have this thing called "Car Registration", maybe you have heard of it? YOu pay a tax now, what would be harder about collecting the tax if we went with a consumption tax?? Currently it is hard to collect on wages paid in cash, drug deals, etc. so how much difference would car deals make when drugs is the largest industry on the planet and we are flooded with illegals? The drug dealers [and money launderers, prostitutes, thieves, robbers, etc.] would pay their taxes when they used the proceeds to buy something, that does not happen at the federal level currently.
Collecting a consumption tax is much easier nowadays than working through the IRS. The process of paying income taxes forces people to divulge all sorts of private records, like how much they make, what they spend on healthcare and where, things that I personally don't feel that I owe anybody information on. Point of sale terminals can be programmed to collect the consumption taxes anonymously. The best man for that job is a machine.
If prices rise due to the taxes and people go outside the country to buy things as a result, collect the consumption tax at the border.
A consumption tax replacing the income tax would be the death of big government, when people realized that more government raises the cost of things they would drop it like a bad habit. Currently, people think the rich are paying for the government but the rich are evading taxes like crazy so basically you have the middle class being taxed to death to create a socialist culture which thrives on the votes of the poor. This sucks if you have not noticed it yet.
A consuption tax such as a federal sales tax would never work. The rate would need to be set at 20%+ and would kill the auto and large ticket industries.
It would create a huge black market and a barter society. People would simply trade goods and services to avoid tha tax.
It would create a huge black market and a barter society. People would simply trade goods and services to avoid tha tax.
One very odd thing about the consumption tax is how it treats savings in the transition from an income tax regime. Consumption tax moves the tax burden from income to spending, so it is neutral for consumers. However, saving occurs between income and spending, so any savings accumulated under income tax regime and spent under consumption tax regime are taxed twice. Without this double taxation, consumption tax advocates would have a lot more trouble making the numbers work. Yet you'll never see a "fair tax" advocate acknowledge this problem.
Only tax-deferred retirement savings would escape double taxation. Roth IRAs would be double-taxed along with ordinary savings. For this reason alone, if you think the "fair tax" proposal stands any chance politically, stay away from Roth IRAs and max out your 401k.
Martin
Only tax-deferred retirement savings would escape double taxation. Roth IRAs would be double-taxed along with ordinary savings. For this reason alone, if you think the "fair tax" proposal stands any chance politically, stay away from Roth IRAs and max out your 401k.
Martin