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In every U.S. state there are taxes levied that are based upon net incomes and/or the the prices of items within sales transactions.
Individuals' purchases rather than their filed income tax forms are generally no less, but usually more accurate reflections of taxpayers and their dependents comparative wealth and incomes.
Opponents of general sales taxes contend:
Wealthier people are able to invest and/or save; much of their financial transactions are not subject to sales tax; general sales taxing rather than taxing net incomes is to the advantage of the wealthy.
Sales tax advocates respond: Transaction amounts rather than filed income tax forms are superior reflections of peoples' and their dependents proportionally comparative wealth and incomes.
Wealthy individuals' transfers of wealth in manners that are not subject to sales tax, rather than items they they cite to reduce their income taxes, are not proportional to their gross incomes, of greater tax benefit to them.
The tax avoidance due to amounts of transactions that would not be subject to sales taxes are (for the more wealthy), lesser proportions of their gross incomes, than tax avoidance enabled by their cited items to reduce their income taxes.
A general sales tax would be no less equitable then USA's income taxes.
You are mixing a number of ideas. I only want to address your subject line, which is incorrect.
The economics are quite clear. Sales taxes are regressive. The % in tax paid for by the poor will have greater marginal disutility that that same amount paid for by the rich.
You are mixing a number of ideas. I only want to address your subject line, which is incorrect.
The economics are quite clear. Sales taxes are regressive. The % in tax paid for by the poor will have greater marginal disutility that that same amount paid for by the rich.
S.
Sandpointian, the initial post is entirely devoted to disputing your contention; (it argues that a general sales tax is not more regressive than our total federal taxes upon incomes). I do not know what other “mixing (of) a number ideas” you referred to.
When comparing all of the federal taxes levied upon the working-poor to that of the wealthy, the federal taxes include FICA payroll taxes levied upon employees wages, plus federal individual income taxes.
Considering only the ratio of taxes to the taxpayers' gross incomes, a federal general sales tax would NOT be more regressive than our total federal taxes now levied.
Concerning “disutility”; when additionally considering the national economic benefits due to items not subject to a general sales and items that reduce individuals' income taxes, a federal general sales tax would NOT be more regressive than total federal taxes now levied.
You made a ridiculous comment that a sales tax wouldn't be regressive.
Ok, show your math.
FICA is regressive. Everyone will agree, at least should agree. Although the tax for the employee is low compared to what a national sales tax would need to be. Benefits are also quite high.
Estimates place a national sales tax at 40%+ and more likely much higher than that once fraud and exemptions get accounted for.
You made a ridiculous comment that a sales tax wouldn't be regressive.
Ok, show your math.
FICA is regressive. Everyone will agree, at least should agree. Although the tax for the employee is low compared to what a national sales tax would need to be. Benefits are also quite high. ...
... Show us some math that indicates that isn't going to be regressive.
Aridon, you don't know me and you've apparently incorrectly assumed what's my political positions.
I'm pleased that you agree that FICA is a regressive tax. Unlike many other government activities. I find no fault in the manner of Social Security Retirement program's administration.
Due to the advances of medical technology, the duration of life has been extended but the quality of that longer life has not entirely kept up with the extended numbers of years and the greater cost of the improved medical technology. I advocate it be funded differently.
Refer to first post of the discussian thread: http://www.city-data.com/forum/econo...-rates-10.html .
Regarding regressive character attributed to a sales tax, refer to post #96 of the same thread.
You're presuming I agree with Fair-tax proponents contending we can replace all income taxes with a federal general sales tax.
I strongly advocate reducing the 15.3% FICA tax on payrolls to 6.2% that's continued to be paid by employers and employees. No portion of the payroll tax should fund Medicare. The 9.1% of payroll tax revenue should be replaced with a 4.55% general sales tax that will provide revenue exceeding the reduction of payroll tax.
After that, we should continue to incrementally enact the Fair-tax but I believe it will never entirely replace taxing net incomes. I contend after some incremental step we will approach an unacceptable sales tax rate.
If I'm incorrect, income taxes will be eliminated entirely.
i am being diplomatic. Your writing was confusing and not easy to unpack.
When comparing all of the federal taxes levied upon the working-poor to that of the wealthy, the federal taxes include FICA payroll taxes levied upon employees wages, plus federal individual income taxes.
Considering only the ratio of taxes to the taxpayers' gross incomes, a federal general sales tax would NOT be more regressive than our total federal taxes now levied.
You stated that sales taxes are not regressive. This is not true and obvious to anyone with any background in economics. However, the argument that imposing a universal sales tax to replace the myriad of taxes might end of being less regressive, well, that is a different argument. Is it possible to structure a sales tax such that it is less regressive on net than our current incomes taxes? Perhaps. But it would depend on the exact design. Subject more to an policy white paper exercise than a post on City-Data.
But the problem with sales taxes vs. income taxes is they mess with the price as a signaling mechanism, thus leading to suboptimal allocations of resources. So while they might conceivably be made to be less regressive, they may also impose a cost on the economy as a whole.
Consumption taxes are kind of what you arguing for. But note that their implementation are in countries with steep income taxes, a double whammy.
i am being diplomatic. Your writing was confusing and not easy to unpack.
When comparing all of the federal taxes levied upon the working-poor to that of the wealthy, the federal taxes include FICA payroll taxes levied upon employees wages, plus federal individual income taxes.
Considering only the ratio of taxes to the taxpayers' gross incomes, a federal general sales tax would NOT be more regressive than our total federal taxes now levied.
You stated that sales taxes are not regressive. This is not true and obvious to anyone with any background in economics. However, the argument that imposing a universal sales tax to replace the myriad of taxes might end of being less regressive, well, that is a different argument. Is it possible to structure a sales tax such that it is less regressive on net than our current incomes taxes? Perhaps. But it would depend on the exact design. Subject more to an policy white paper exercise than a post on City-Data.
But the problem with sales taxes vs. income taxes is they mess with the price as a signaling mechanism, thus leading to suboptimal allocations of resources. So while they might conceivably be made to be less regressive, they may also impose a cost on the economy as a whole.
Consumption taxes are kind of what you arguing for. But note that their implementation are in countries with steep income taxes, a double whammy.
But as I said, the proof is in the details.
Sandpointian, I appreciate your tactful description of my prose. I try, but too often my attempts are too trying.
If as I believe, the tax revenue of a 4.55% sales tax would exceed 3/5 of our current FICA, the reducing FICA by 9.1% of payroll and replacing it with the sales tax is justified. We do not want to lose tax revenue.
People's perceptions are a problem; the employers share of that 9.1% is ubiquitous but concealed within our current prices. People will not be aware when its gone but they'll be very much aware of the impending, then the enacted, then the initial years of collecting 4.55% sales tax.
At least in the beginning, they'll perceive the normally expected price increases due to inflation as being caused by the 4.55% general sales tax.
The goal is to waive sales taxes on items that poorer people per capita use more often or in greater quantities. Where quantities or transaction prices are an issue, it may be feasible to cap the sales amounts or units of products per capita and per duration of time.
I would prefer that sales tax be waived upon food that's not provided by restaurants or caterers; even purchases from McDonald should be subject to sales tax.
The dollar amounts of sales tax waivers upon rents per residential units, and/or specified utilities delivered to each residential unit should be “capped”. The caps should be dollar's per month and the caps should be subject to annual cost of living adjustments, (COLAs). An alternative to capping dollars per month, could be units of specific utility products per month. Capping the product eliminates the need for utility COLAs.
It's important and politically difficult that we refrain from waiving the sales tax upon too many items or purchasers.
You made a ridiculous comment that a sales tax wouldn't be regressive.
Ok, show your math.
FICA is regressive. Everyone will agree, at least should agree. Although the tax for the employee is low compared to what a national sales tax would need to be. Benefits are also quite high.
Estimates place a national sales tax at 40%+ and more likely much higher than that once fraud and exemptions get accounted for.
Show us some math that indicates that isn't going to be regressive.
Ok. I disagree. Social Security payout is massively progressive. I pay twice as much into the system as somebody making $60k in 2017 dollars. My Social Security check will only be 15% higher. Social Security is a pension system based on a very fair “everybody contributes” model. I have no issue with the progressive nature of Social Security payouts but the program is highly progressive and the most successful social program in US history. If you don’t contribute, you don’t get a monthly check when you retire. Everyone has a stake in the system. That’s very different from Federal income taxes where half the country pays little or no tax. No stake. It’s easy to go Full Bernie handing out all that free stuff when you’re not paying for it.
At the state level, flat state income taxes and sales taxes are a huge control on state spending because everyone pays. If you fund everything with a steeply graduated income tax and an invisible steep corporate income tax, it’s only causing pain to a few people when you hike taxes.
I think the “everyone has a stake” is critical. With sales tax, exempt food and inexpensive clothing like most states do. If you want that $1,000 iPhone, you pay the sales tax. Personally, I’d only exempt “healthy” food. Soda, junk carbs, or convenience foods? Tax away.
Ok. I disagree. Social Security payout is massively progressive. I pay twice as much into the system as somebody making $60k in 2017 dollars. My Social Security check will only be 15% higher. Social Security is a pension system based on a very fair “everybody contributes” model. I have no issue with the progressive nature of Social Security payouts but the program is highly progressive and the most successful social program in US history. If you don’t contribute, you don’t get a monthly check when you retire. Everyone has a stake in the system. ...
GeoffD, I find no fault in the manner of Social Security Retirement program's administration. We have to better fund it and I object to our present method of acquiring the tax revenue to fund it.
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