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I'm not saying sales tax is nonsense but you inadvertently provided the best justification for that statement that I've seen. You just showed how sales tax is ridiculously complex, arbitrary, and inconsistent. And that didn't even include the various tax-exempt statuses or that there are hundreds of different tax rates when you include municipalities, transit authorities, redevelopment zones, and others that piggyback onto the state sales tax.
Incredibly COMPLEX? A perfect description of the IRS taxation process. A VAT is collected at the point of sale. NO CPA\s or TAX ATTORNEYS involved. Just forward the amount collected at the POS to the appropriate REVENUE department.
Clothing is taxed...
...
You don't need $200 Nikes.
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.
Sales taxes tax discretionary spending, not income.
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.
Quote:
Originally Posted by Mircea
Throughout the world, real estate, whether residential, commercial or industrial, is exempt. That means persons who buy or lease residential, commercial or industrial properties are not taxed.
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.
Quote:
Originally Posted by Mircea
So, people who rent apartments are not taxed, but those who rent hotel/motel space are. I don't see an issue with that. You have a choice in the hotel/motel you want to use.
Not true either - technically, most if not all hotel taxes are not sales taxes in most areas of the country.
Quote:
Originally Posted by Mircea
Insurance and legal services are not taxed. Medical services are generally exempt except for elective procedures, treatments, medical devices and related pharmaceuticals.
In general labor is not taxed in the US, that means any service not just professional services.
Quote:
Originally Posted by Mircea
Clothing is taxed, but clothing for infants/toddlers is exempt, as are infant/toddler items such as bottles, nipples, teething rings, strollers etc.
Safety equipment, like child car seats and protective equipment for sports and work are generally exempt. Ohio does tax steel-toed safety shoes, but some States do not.
I have another I bought at Valley Thrift Store which is a for-profit entity so I did pay a sales tax, unlike Goodwill and St Vincent de Paul where I buy my other clothes which are non-profits and exempt from sales tax.
Unprepared food is not tax, but prepared food and food served in restaurants is (although no sales tax on carry-out food in Ohio, but Kentucky does charge sales tax for carry-out food).
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.
Quote:
Originally Posted by Mircea
The point being spending is discretionary and you can choose to pay sales tax or not or control how much sales tax you give up.
Not really, again it depends on where you live. Sales taxes are state and local taxes not Federal, there are areas of the country with no sales taxes.
I would prefer a flat tax with an exemption of some basic level of income.
One issue with income tax is it is an inefficient way to raise revenue to operate the government. By inefficient, I mean our governments spend a lot of money on the IRS and the various state income taxing authorities, plus individuals and businesses spend a boatload on planning for future tax obligations and ultimately preparing & filing the tax returns.
A sales tax is more efficient - less overhead in total.
A progressive consumption tax is even more efficient still. With a progressive consumption tax, at 65,000 feet, each of us would report how much money we made, and how much money we saved/invested. By definition, everything else is consumption, so you pay taxes on that consumption. It can be progressive - the first $X of consumption could be tax free, for example, and higher rates of consumption could bet taxed progressively higher.
Such a progressive consumption tax has several nice attributes. It rewards savings & investment, which is key to capital formation in future time periods. It discourages over-consumption - but if someone has the means, they can do so if they wish.
One issue with income tax is it is an inefficient way to raise revenue to operate the government. By inefficient, I mean our governments spend a lot of money on the IRS and the various state income taxing authorities, plus individuals and businesses spend a boatload on planning for future tax obligations and ultimately preparing & filing the tax returns.
A sales tax is more efficient - less overhead in total.
Total agree plus it goes a long way to eliminate the unground economy. Puerto Rico is a good example, they are over the edge of bankruptcy in spite of having an extra ordinary high tax rate. Problem is, PR is largely a cash society where under the table payments are the norm.
At least with a sales tax, much of this is captured.
Sales tax taxes the underground economy. Merchants have books, while individuals do not. Prostitutes and drug dealers pay sales tax, but not income tax on their earnings. That's not trivial, since the underground economy is 11% or 12% of the total US economy.
Sales tax is regressive, and collects revenue from poor people, while income tax does not.
One issue with income tax is it is an inefficient way to raise revenue to operate the government. By inefficient, I mean our governments spend a lot of money on the IRS and the various state income taxing authorities, plus individuals and businesses spend a boatload on planning for future tax obligations and ultimately preparing & filing the tax returns.
A sales tax is more efficient - less overhead in total.
A progressive consumption tax is even more efficient still. With a progressive consumption tax, at 65,000 feet, each of us would report how much money we made, and how much money we saved/invested. By definition, everything else is consumption, so you pay taxes on that consumption. It can be progressive - the first $X of consumption could be tax free, for example, and higher rates of consumption could bet taxed progressively higher.
Such a progressive consumption tax has several nice attributes. It rewards savings & investment, which is key to capital formation in future time periods. It discourages over-consumption - but if someone has the means, they can do so if they wish.
You are whitewashing with your preferences and simplifying some of the complexities of net earnings - the current income tax is inefficient, not because of determining income but because of dealing with exceptions.
Income, flat and consumption tax all need to track income to work. A consumption tax is much less efficient than a flat tax - a flat tax with first $X0K (maybe $30K) exempt is very easy, can be done on a postcard - only need to how much was made - nothing else.
Consumption is removing savings instead of exemptions to get to taxable income. Your consumption taxes would need a process (and IRS oversight) to determine and amount to remove of net savings - not just what was saved but what was earned on savings, what was spent out of savings, what was earned in net investments including stocks dividends received, also need to account for what was exempt (Roth). Consumption tax would also be inherently taxing things that are not really consumed such as charitable donations and non-traditional investments (Commodities such as gold and silver or setting up a small business).
Sales taxes are simple and more fair in some ways because it prevents hiding income but misses things like what is spent overseas - big bonus for a mobile consumer. Sales taxes are essentially regressive also.
If want to simplify, go to a simple tax - A flat tax would need to track one thing - income.
With a progressive consumption tax, at 65,000 feet, each of us would report how much money we made, and how much money we saved/invested. By definition, everything else is consumption, so you pay taxes on that consumption.
Quote:
Originally Posted by ddeemo
You are whitewashing with your preferences and simplifying some of the complexities of net earnings
I agree - that's what I meant when I wrote "at 65,000 feet." Of course it is much, much more complex - but getting into it in detail is above the heads of most people here (clearly, not over your head).
Quote:
Originally Posted by ddeemo
Income, flat and consumption tax all need to track income to work. A consumption tax is much less efficient than a flat tax - a flat tax with first $X0K (maybe $30K) exempt is very easy, can be done on a postcard - only need to how much was made - nothing else.
No doubt. But income taxes - flat or progressive, simple or complex - at the margin create a disincentive to generate more income. In contrast, a consumption tax - flat or progressive, simple or complex - does not; instead, it creates an incentive to save. Savings=Investment. The incentive to save is nice property.
Quote:
Originally Posted by ddeemo
Consumption is removing savings instead of exemptions to get to taxable income. Your consumption taxes would need a process (and IRS oversight) to determine and amount to remove of net savings - not just what was saved but what was earned on savings, what was spent out of savings, what was earned in net investments including stocks dividends received, also need to account for what was exempt (Roth). Consumption tax would also be inherently taxing things that are not really consumed such as charitable donations and non-traditional investments (Commodities such as gold and silver or setting up a small business).
Those are some of the types of details I explicitly didn't go into when I said "at 65,000 feet."
Quote:
Originally Posted by ddeemo
If want to simplify, go to a simple tax - A flat tax would need to track one thing - income.
Going to a flax tax - a single rate - doesn't make our current system any more or less simple than a progressive tax. As you've pointed out, the thing that makes our system complex is the manufacture of incentives & disincentives by our elected representatives (above you called them exceptions).
I'm not saying sales tax is nonsense but you inadvertently provided the best justification for that statement that I've seen. You just showed how sales tax is ridiculously complex, arbitrary, and inconsistent. And that didn't even include the various tax-exempt statuses or that there are hundreds of different tax rates when you include municipalities, transit authorities, redevelopment zones, and others that piggyback onto the state sales tax.
I showed you exactly how Euro-States employ Value Added Tax (VAT), which is their version of a sales tax.
Euro-States have used sales taxes for decades and decades without incident.
Nothing is more "ridiculously complex, arbitrary and inconsistent" than income tax.
When you have to pay an established expert to decipher income tax laws in order to have any hope of taking advantage of the "ridiculously complex, arbitrary and inconsistent" income tax laws, then that is a problem.
When even the experts are completely unaware of the myriad changes in the "ridiculously complex, arbitrary and inconsistent" income tax laws, so that you don't get to take advantage of deductions and credits available to you, that is a problem.
When you complete your income tax forms and submit them, and your government won't even tell you after processing your tax forms that you could have taken deductions and credits, but didn't, because you didn't have the money to hire an expert and didn't understand the "ridiculously complex, arbitrary and inconsistent" federal income tax laws, and so you paid more income tax than you should have, that is a problem.
When tax-payers have to waste precious tax-dollars to fund tax courts at the State and federal level so that judges can interpret the "ridiculously complex, arbitrary and inconsistent" income tax laws, that is a problem.
When Americans are fined, penalized, subjected to interest payments, have their wages garnisheed and liens placed on their property, because the "ridiculously complex, arbitrary and inconsistent" federal income tax subjected them to the Alternative Minimum Tax (AMT) that they didn't even know existed, or understood how it applied or understood that they were subject to the AMT, that is a problem.
I'm certain that you, perhaps as a tax attorney or tax accountant, are frightened of a sales tax because it means the loss of work for you and you'd have to find a new job, but having a "ridiculously complex, arbitrary and inconsistent" federal income tax just so you can have a job is not a valid argument.
As a consumer of any class, do you need to hire a tax attorney or tax account to pay sales tax?
No. It doesn't get any easier than that. Even a retarded person can do it.
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