Sales taxes are objectively inferior to income taxes

[Mircea]

Originally Posted by Nik4me

The sales tax and what is taxed depends on the State: in Rhode Island $200 Nike’s won’t be subject to a sales tax as well as all clothing under $250.

In this instance we're talking about a federal sales tax, not State sales taxes.

As it stands, a federal sales tax would require a constitutional amendment for the same reason the federal income tax required a constitutional amendment.

The Constitution explicitly states that tax have to be apportioned by population.

Accordingly, it would be illegal to subject all Americans to 20% tax on a certain adjusted gross income. The Constitution requires apportionment, so some Americans would pay 1% and some 55% and some 85% and everywhere in between.

The 13th Amendment allows the government to levy a uniform income tax on all Americans, regardless of their State of residence.

The government could not institute a uniform sales tax on all Americans. It would have to be apportioned, so that people in Wyoming and Vermont paid 1% and people in California paid 85% and people in Ohio paid 65% and people in Texas paid 75% and people in New York paid 80% and so on, based on population.

The government can get around that by using excise taxes instead.

All Americans pay the same federal excise tax on gasoline.

If you look at federal tax schedules for say, the year 1930, you'll find that chewing gum, oil, gasoline, and a host of other things were subject to a federal excise tax of varying amounts.

Contrary to the claims of many, it would not be difficult.

Everything is coded by NAICS.

For example, under NAICS there's metals. That's broken down into sub-categories then classes, then groups then specific items. It's basically a taxonomy. So you have metal ores, and that's broken down into aggregate metal ores, crushed metal ores, and metal ores in various states of processing and refinement all the way down to ingots and the rolls, tubes, extruded tubes, sheet metals, etc, etc.

Clothing, too. When you go to Amazon and click on "clothing" and see it broken down in men's, women's, childrens', infants', outerwear, accessories, blah, blah, blah, that pretty much conforms to NAICS.

Tariffs are based on NAICS. If you're an importer, and you want to know if something is subjected to a tariff, then you need to know the NAICS code for that item, unless you want to spend an hour or two or three searching.

Anyway, it just takes a couple of mouse-clicks to levy an excise tax or change it or delete it.

[Mircea]

Originally Posted by ddeemo

Not all sales taxes are discretionary, there are items that are needed that are taxable sales. Income can be discretionary for a small business owner or those that major income is from investments.

Like what?

Originally Posted by ddeemo

Not true at all - many places in the US charge a tax on Real Estate transfer - called a transfer tax. Technically gift taxes and estate (or death) taxes are essentially taxes on real estate transfers. Many countries also tax real estate transactions.

Real estate transfers use either a warranty deed or a trust deed. There are other deeds as well. They may indicate the land value, or the loan value or in the case trust deeds, a nominal value that you make up on the fly.

But, alas, none of that has to do with a federal sales tax.

Originally Posted by ddeemo

Not true either - technically, most if not all hotel taxes are not sales taxes in most areas of the country.

Ohio counties charge sales tax.

Originally Posted by ddeemo

In general labor is not taxed in the US, that means any service not just professional services.

Labor is taxed in the US. That's what an income tax is -- a tax on labor.

Nearly all States tax the labor charge for replacing/repairing the brakes on your car, not just the parts.

When then plumber or HVAC man comes to your home, you'll pay a sales tax on his labor, too.

Originally Posted by ddeemo

Very location specific - clothes are taxed many places but not everywhere in the US. Also some states have limits on price of clothing not taxed and others have tax free days, mostly before school starts.

For food, rules vary greatly - some states tax all food and others have partial rules on prepared food for example, in some states, if I get a cold sandwich it is not taxed but if I get it toasted it is taxed.

Again, we're discussing a federal sales tax, and I was merely pointing out how other countries have established their sales taxes.

The federal government is very likely to do what other countries do, and not what your State does.

[SWFL_Native]

Originally Posted by splattenburgers

For one thing the term sales tax (or VAT in case you are living somewhere that uses that instead) is misleading. Yes it's technically collected when buying something rather than being taken of your salary/income directly but in the end you are still using your salary/income to actually pay the tax. This means that in a way taxing sales/consumption is actually just a dumb way to tax somebody's income.



Secondly sales/consumption taxes have a greater chance of harming the economy compared to income taxes since they de-incentivize spending money on goods while also possibly having other unwanted side effects such as discouraging tourism.


You can debate how high or low income taxes should be but in any case I would argue that sales taxes are nonsense regardless of if one desires high or low taxes.



Actually, I would argue that ALL taxes in general except the income tax is stupid. If I could I would just instate a flat 50% income tax and then get rid of all other taxes except maybe certain kinds of tariffs.

Not really the answer is it "depends"... For example applying a Gas tax to an area to support road construction/maintenance makes sense. Essentially taxing the users of the roads and perfectly offsetting that cost within an area is a good idea. It starts to fall apart when you introduce EVs that don't consume gas but power. You can tax the local utilities to account for the short-fall but then you are double taxing people that drive petrol and consume electricity.

Other examples are fast food, junk food, soda taxes where essentially you tax items that cause poor health outcomes (like cigs/booze) and apply those fund to healthcare to support the cost of care for diabetes and heart disease. Again not a perfect model but it can be effective if applied correctly.

Income tax works to support other basis infrastructure of the federal government where sales/use tax are for more localized services. Property tax can used effectively for school districts, fire districts, police, and other municipal services.

The answer is always it "depends" but I would argue that we have a very effective tax system in the US as well as allocation of funding. The real problem is government in-efficiency on all levels. For every $1 we are pumping into that washing machine we are getting $0.50 back worth of services. The waste, inefficiency, and in-effectiveness is astounding.

[artillery77]

Originally Posted by splattenburgers

For one thing the term sales tax (or VAT in case you are living somewhere that uses that instead) is misleading.

Try to not confuse these two. A sales tax is a tax levied upon a final sale of a usable good. To an end individual consumer, it may look the same as a sales tax, but they are markedly different.

A sales tax is best deployed when you have an existing market for retail activity where you want to tax activity. While the tax will have a negative impact on the market, it is assumed that it will not be significant enough to eliminate the market entirely.

A VAT (Value Add Tax) is deployed at every level of the production cycle. Producer B buys resins and pays VAT to obtain them from Producer A. However Producer B can then credit paid taxes against the VAT it charges when it sells extrudes plastic forms to Assembler C. Assembler C can also take credit for the VAT it pays when it sells parts to Distributor D.

Along the way, each step is expected to add value. As the underlying price increases, the amount of tax to collect will be larger than the amount of tax it has already paid. In this manner, a VAT resembles both a sales tax and an income tax.

Its utility is beneficial to a government because it will gain money faster. The tax is also self-reinforcing. On every purchase, one will expect to either pay VAT or import duties. The system also inherently rewards exporters as the final sale will not be subject to VAT. The VAT paid to suppliers may be claimed from the government if all end sales are eventually for export. While the government doesn't receive tax in the end, it does have the time value of the money during the production cycle.

One of the things countries do to encourage outsourcing is to offer companies that get the majority of their supplies subject to VAT inputs a lower income tax rate than those that import most of their supplies. So, while the original automakers were attracted to China because of the market and below market steel, they soon found profits could be increased if they brought in their main suppliers to sell to their China facility from China. Those suppliers, in turn realized the same thing. Given unilateral access to the American market, it was only sensible to place major manufacturing in China to supply both markets.

America could combat this by enacting her own VAT/duty structure, but it is politically unable to do so because it is seen as a tax on the poor instead of truly just capturing the value add piece of the supply chain. As such, we need to focus on services instead of goods, whereas high cost Germany and Japan could maintain a higher percentage of their economies in manufacturing...which tends to benefit poorer families.

It's certainly not the only factor on manufacturing, but there's an important distinction if one is talking taxes. They are different.

[TwinbrookNine]

Originally Posted by Thatsright19

Sales tax taxes consumption not savings.

You don’t have “zero” control over income tax. You can control the kinds of income you generate and what deductions you may get.

My consumption is paid for with my "savings." Whether "income" for discretionary spending, or socked away, its still savings. I never let a credit card balance go unpaid before the end of that billing cycle. Credit cards are merely a convenience. A loan is merely something that I can easily afford to make a payment on every month, calculated as such, in advance. An expenditure I find better to "put off" for a spell, for one well thought out reason or another.

Washington DC has 100% control on what they will take from my paycheck. Always has. Do you remember income tax rates in the 50%'s? I do. It can happen again. Overnight, in fact.

[ddeemo]

Originally Posted by Mircea

Like what?

Some things that are subject to sales taxes are not discretionary - Food, medicine and clothing is taxed in some places - those are necessities. This means some level of sales taxes are not discretionary, even if have little income.

Also someone with a small business can choose how much is "income" vs how much is held in an unrealized income account, something like business reserve cash or inventory. Someone with investments can choose how much is income (available to spend) vs continue to hold. Both of these mean that can control income level.

Originally Posted by Mircea

Real estate transfers use either a warranty deed or a trust deed. There are other deeds as well. They may indicate the land value, or the loan value or in the case trust deeds, a nominal value that you make up on the fly.

But, alas, none of that has to do with a federal sales tax.

There is no federal sales tax. But the reality is that some places in the US and overseas DO tax RE transfer - unlike your statement that no one does. The type of deed is irrelevant - the fact that RE transfers are taxed sometimes through transfer tax and sometimes through gift tax or estate taxes if amount is high enough.

Originally Posted by Mircea

Ohio counties charge sales tax.

Most places, (including Ohio https://www.tax.ohio.gov/portals/0/c...odging_tax.pdf ) - it is NOT a sales tax, it is a lodging tax and several other names - normally different rate than sales taxes and often has part designated for things like tourism.

Originally Posted by Mircea

Labor is taxed in the US. That's what an income tax is -- a tax on labor.

Not what is being talked about - sales tax on labor is if labor is taxed directly.

Originally Posted by Mircea

Nearly all States tax the labor charge for replacing/repairing the brakes on your car, not just the parts.Labor is taxed in the US.

When then plumber or HVAC man comes to your home, you'll pay a sales tax on his labor, too.

NOT TRUE - don't confuse what one state does with what the entire country does, the law varies greatly across the country. 3 states tax all labor including professional services, 15 states do not tax any labor and 32 states tax some labor but not all. For example - Ohio taxes everything but professional services, South Dakota taxes all labor including professional, California and Illinois don't tax any labor.

Originally Posted by Mircea

Again, we're discussing a federal sales tax, and I was merely pointing out how other countries have established their sales taxes.

The federal government is very likely to do what other countries do, and not what your State does.

Most "other countries" don't have a sales tax, Value added tax (VAT) is very different. A Federal sales tax is likely to do what makes sense for the US.

I would say my state is actually many - I currently have residences in 2 different states and have lived and worked at least a year in 10 other States. I am basing my info on experiences in many states, not what any one state does. You made some specific statements about states sales taxes that seem to be based on your limited state experience and are NOT what is true many places. I have seen many of the differences across the country in how taxes are applied.

[TimtheGuy]

Originally Posted by splattenburgers

For one thing the term sales tax (or VAT in case you are living somewhere that uses that instead) is misleading. Yes it's technically collected when buying something rather than being taken of your salary/income directly but in the end you are still using your salary/income to actually pay the tax. This means that in a way taxing sales/consumption is actually just a dumb way to tax somebody's income.



Secondly sales/consumption taxes have a greater chance of harming the economy compared to income taxes since they de-incentivize spending money on goods while also possibly having other unwanted side effects such as discouraging tourism.


You can debate how high or low income taxes should be but in any case I would argue that sales taxes are nonsense regardless of if one desires high or low taxes.



Actually, I would argue that ALL taxes in general except the income tax is stupid. If I could I would just instate a flat 50% income tax and then get rid of all other taxes except maybe certain kinds of tariffs.

If only things were that simple. You analysis and ideas are terrible and would not work.

[redguard57]

Generally speaking

Wealth tax - Bad for the wealthy and arguably bad for business. Takes money out of their investment capital.

Income tax - Bad for high income earners, upper middle class. More you make the more you pay. This hits people like doctors, engineers, pro athletes, etc... the hardest.

Property tax - Bad for middle class, whose largest single expense and investment is typically the house.

Sales tax - Bad for working/poor class, who spend most of what money they've got on goods and services, so it reduces their available money.

Corporate tax - Kind of bad all around. Companies just charge more for their goods and services to cover it, although there has to be some kind of accountability for businesses or everyone will just incorporate to avoid paying taxes.

Capital gains tax - similar problems to wealth tax.

Value added tax - makes everything more expensive.

Having lived in a number of states that handle this differently, I think the best policy is to have the highest rate be income tax, and help keep it moderate by reasonable rates of all the other taxes.

As a middle income earner, if I have to choose I'd rather pay a higher rate on income tax in order to keep my property tax bill lower. It really sucks getting gentrified out of your house by taxes because the neighborhood got hot, the valuation & thus tax bill exploded & you could no longer afford to live there even if the house was paid off, forced to sell. I've witnessed that in the no-income-tax states like Texas and Washington.

By my standard, Colorado and Georgia have the most "even" tax structures. The midwest - OH, MI, MN, WI, IA, and MO seem to also take that approach more or less. the rest of the states either do high in all areas (NY, NJ, & CA), or they have no or low sales but high income or property (OR, DE, NH, MT, AK), or low or no income tax and high property or sales tax (TX, NH, VT, NE, WY).