Replacing reduced FICA payroll tax rates with a federal general sales tax. (retirement plan, collection)
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I advocate to some extent reducing the FICA payroll based tax for funding Social Security retirement, and replacing it with revenue from a general sales tax. Due to the general sales tax there’d be no net tax reduction to employees, but it would increase tax revenue ear marked for Social Security retirement, better enabling full Social Security benefits for the benefit of employees when they retire. this is of some net financial benefit to retiring employees’ families and of net economic benefit to our nation.
FICA taxes levied upon employers are based upon their gross payrolls rather than upon their net incomes. Anything that increases payroll, (e.g. increased hiring, and/or wage rates, and/or hours worked), increases an employer’s net taxes. The extents of employers’ FICA taxes are not directly related to their enterprises’ net incomes. Thus, FICA is a regressive tax as levied upon employers and employees.
Many are opposed to a federal Sales tax because they believe it has a regressive effect upon taxpayers’ budgets.
The reduced portion of FICA payroll tax rates advocated to be replaced, currently has a much greater regressive effect upon the budgets of employees and their dependents. FICA taxes upon employees are annually capped. Employee incomes beyond annual capped amounts and incomes not derived from employment, (i.e. effectively almost the entire incomes of the wealthiest individual persons) are not subject to the FICA payroll tax.
A substantial portion of individuals’ incomes that are not subject to general sales taxes, are spent for items qualifying for reductions of their annual income taxes. Individuals expenditures rather than their income tax filings, are a more accurate reflection of USA’s aggregate individuals’ wealth and annual incomes. A federal general sales tax, rather than an increase of income tax rates, would harvest greater amounts of tax revenues from those earning more than USA’s median income.
So in your proposal how much would you reduce the current fica rate and how much would the federal sales tax be? Additionally are there any purchases that would be exempt from the federal sales tax? Who saves more money both as a percentage and actual dollars annually the person earning 40k a year or 400k?
In addition to all of the other flaws discussed in the other thread, how do you think anyone who's put money into a Roth IRA/401(k) is going to feel about this proposal?
Don't worry, the federal government will never tax the earnings on the Roth just like they promised. But that doesn't mean they can't tax you when you spend it!
After that you can get into what's subject to tax? It will have to be different from what the states charge sales tax on (given the disparity in all of the states systems) so you can't piggyback off of that collection system. Who's going to pay for all of the compliance start-up costs for this new tax.
What about foreign purchases, will there now be a federal use tax to capture all of that spending. Will customs agents be at airports and cruise terminals to collect on all of the trinkets that were purchased elsewhere?
Last edited by SuiteLiving; 08-20-2017 at 04:58 PM..
So in your proposal how much would you reduce the current fica rate and how much would the federal sales tax be? Additionally are there any purchases that would be exempt from the federal sales tax? Who saves more money both as a percentage and actual dollars annually the person earning 40k a year or 400k?
LowExpectations, currently, federal FICA’s total tax revenue is approximately or effectively 15.3% of USA’s payrolls. The tax levied equally upon employers and their employees. It’s approximately rather than precisely 15.3% because individual employees annual FICA taxes are “capped” at a legally maximum amount.
Its proposed that the entire 2.9% of payrolls earmarked for Medicare and half of the 12.4% of payrolls earmarked for Social Security be halved.
Thereafter FICA would be expected to fund no more than half of Social Security retirement plans, and nothing else.
Both each employers and employees FICA taxes would be reduced from 7.65% to be 3.1% for each of them.
The reduction of FICA revenue would (at least) be sufficiently replaced by an effectively 4.55% sales tax.
LowExpectations, The advantage to employees, their dependents, and USA’s economy is the better enabling retention of full Social Securities’ future benefits with no net increase of employees’ taxes.
FICA payroll taxes certainly do not promote job creations. Because the tax is unrelated to an enterprises net income, it’s a greater drag upon smaller enterprises struggling against low profit margins. Enterprise’s reduced net taxes are of some additional net economic benefit to our nation.
Individual’s purchases, rather than their income tax filings are a more accurate indication of individuals comparative incomes and wealth. This proposal would effectively greater increase wealthier individuals’ proportions of federal tax payments.
LowExpectations, currently, federal FICA’s total tax revenue is approximately or effectively 15.3% of USA’s payrolls. The tax levied equally upon employers and their employees. It’s approximately rather than precisely 15.3% because individual employees annual FICA taxes are “capped” at a legally maximum amount.
Its proposed that the entire 2.9% of payrolls earmarked for Medicare and half of the 12.4% of payrolls earmarked for Social Security be halved.
Thereafter FICA would be expected to fund no more than half of Social Security retirement plans, and nothing else.
Both each employers and employees FICA taxes would be reduced from 7.65% to be 3.1% for each of them.
The reduction of FICA revenue would (at least) be sufficiently replaced by an effectively 4.55% sales tax.
Do you have data to support that a 4.55% tax rate would replace the fica reduction? Are you just repeating someone else's thoughts as your own? You also failed to address if the proposal you made would exclude anything nor did you address the question of who saves more in dollars and percentage terms the 40k earner or the 400k one
LowExpectations, to the extent that general sales taxes are waived upon sales of products that are more often or in greater quantities consumed or used per capita by lower income persons, or upon capped monthly amounts of such utility service products sold and delivered to individual residences, a flat general sales tax is transformed to that extent be a more progressive sales tax.
My opinion is medicine, or food other than that supplied by restaurants, or caterers, not be subject to the general sales tax.
If we could draft a law that would not tax mass transportation but would not waive taxes upon long distance or luxury travel, I would prefer such transactions not be taxed. It’s my opinion that because it’s difficult to draft legislation the parses ordinary and luxury priced products, I’d want much fewer waivers of sales taxes on classes of products. That’s much less of a problem for utility services that can be measured and confirmed as they're provided to individual residences via pipe or cable.
In my opinion, general sales taxes greatest faults are their inability to waive taxes upon the unemployed poor. But there’s a limit to what’s feasible. An enterprise may not be able to pass on expenses they incurred that are not similarly incurred by their competitors. For example, they’d be unable to pass on an uninsured lawsuit loss that far exceeds their profit margin and net income. But otherwise, enterprises entire expenses are generally passed on to their customers; This is no less true when the poor are among those customers.
So would you tax home sales? Rent? You also for some strange reason keep ignoring the question of who saves more money in $/% a person earning 40k or 400k
So now I am retired & collecting SS, which I paid into all my life, & now you want me to continue to pay, via a sales tax. I think not.
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