Sales taxes are, to my understanding, the most universally disliked by both parties. "Penalizing" purchasing supposedly has a far more direct impact on the economy, and no party wants that. I'm not sure exactly how much impact on the average Joe they really have - but America tends to view economic strength as a more appropriate measure of success than standard of living.

Also, it's my opinion that most taxes (outside of luxury or tobacco) shouldn't be viewed as penalizing. You aren't being punished, you're paying to be a part of society and all the benefits that entails. You might not agree with the rates or the things those taxes go to, but that doesn't make it a penalty.

Flat consumption taxes on everything are actually relatively very degressive because the poorer people spend relatively more of their disposable income on consumption so they would also pay relatively more share of their income in the consumption tax.

Also the problem with sales tax is that it is even easier to avoid than income or asset tax, you just buy the good abroad. You would also need to impose import duties which will clash with WTO. On the other hand, if you could identify Veblen goods (those which are demanded more as their price rises) and impose such tax on them, the tax could actually bring net benefit to the society. However, consumer prefferences are fickle so that isn't a very realisic assumption.

After further though, philcore, a sales tax clearly hurts the lower/middle classes far more than the upper (unless luxury taxes scale with price).

Rich people don't actually buy things anywhere near a rate that scales with income. They buy more, sure, but a guy making 1 million a year doesn't purchase 50 times as much as a guy making 20,000 a year.

haha ulytau said it first, ulytau said it best.

ok, what about the equivilent of a standard deduction? say the tax rate is 20% on everything you buy, but we determine that it takes 20k per year in purchases to maintain some standard of living. Give everyone a $4000 credit per year in the form of a check or something. Those who are spending less than 20K will come out ahead, and those who spend in the $100k range will still end up paying the majority of the taxes even after they get their $4000 check. Think of the countless hours currently wated doing income tax returns being given back!

OK it seems simplistic, but I think that's what we should strive for, simplicity. The current system sucks

@Philcore - I've liked the flat tax with a flat deduction for a long time. The only tweak I would make to it is to have a second tax for capital gains that was a few percent below the 20% to encourage investing. But that would have no deductions. It would be a "((Start of year value + deposits) less (end of year value + withdrawals)) times X%). And if you took a loss, on the year, tough luck. You run a risk investing.

philcore, that *could* work, but now you're really basically luxury taxing everything that isn't deemed "essential, so now you really are penalizing for purchasing - if that's the government's only source of income (or did I misunderstand?) those taxes would need to be huge.

Those who are more fiscally foresightful would have more money for investments and savings, but purchasing beyond the essential is basically being discouraged. I don't know what grand economic consequences it might have, but I'm betting they aren't good it seems to me that jobs will be lost since you're reducing demand, and the overall joy (if not quality) of most people's lives will be reduced as people can't afford their little luxuries.

So, the poor are basically reduced to a completely luxury-free subsistence living because that X box now costs $1500.00.

The middle class is royally shafted, since they are the ones with the highest disposable income to "nonessential purchasing" ratio, and they WILL keep buying stuff - but are paying more for the same amount of stuff.

The rich aren't hurt, maybe even helped, since they're now being taxed on what they buy, instead of what they earn. Even though they're probably coming out ahead, they still don't buy as much, because they're frugal.

I see economic meltdown if you don't tweak it a bit.

"the poor are basically reduced to a completely luxury-free subsistence living... The middle class is royally shafted... The rich aren't hurt, maybe even helped"

Sounds like a pretty precise description of the way the tax system works today.

He wasn't talling about a sales tax but a flat income tax. It has nothing to do with what is spent but everything to do with what is made.

No, he was talking about a flat sales tax with a flat allowance. Someone like Warren Buffet would pay little while someone like Paris Hilton would be fucked.

This system isn't really that revolutionary. It's like a VAT (so it might be revolutionary for the USA I guess) but instead of two or three rates (lowered for neccessities like food, utilities, drugs or encouraged consumption like books or public transportation), you help the poor with an allowance that isn't that useful for the rich. So it would definitely work but if you wanted to build your entire tax system on it, you would have to rise the tax so much it would be quite prohibitive, which would lower aggregate demand and you would get into vicious circle where you would have to raise the tax even more to balance lowered income from the tax. That's why countries use a variety of taxes after all. Again, if your consumption tax is significantly higher than your neighbours', people will just shop there.

Given the latest development, I think the Republicans played it badly (apart from who is right/wrong good/bad).

Both agree to protect the middle-class, however, it looks the public will contribute this to the Democrats instead of the Republicans.

It looks also that the main Republican achievement was to start higher taxes at 400.000 instead of 250.000. Apart from right/wrong, this is bad for public opinion. The public should not see this as their main achievement.

Just my remarks as outsider.

Guess I totally missed his point then. *shrug*

I'm not strictly opposed to a flat tax with deduction off the bottom, but with our current standard of living for the working class, I think it does more harm to them than good. When a person can make a decent living at working wages, it's a fine idea.

No uly, he wasn't. He never mentions sales tax *once*. He was talking about a flat income tax. Try again, dude.

@YJ - So you make the flat deduction be per person plus a per household and you make it be significant (say 10K per household, 10K per wage earning adult, and 5K per non-earner). Why more for wage earners? Because they have overhead involved with going to work (or looking for it) including appropriate clothes, transportation, and more.

"say the tax rate is 20% on everything you buy"

Tax on you buying stuff is sales tax. One man's sale is another man's puchase.

Living in America is horrible.

If you plan a vacation, go anywhere but to the USA.

Take some advice from a tried and true American who knows better.

Not to mention philcore was updating his previous proposition, where the National Sales Tax played the main role. And his whole post is about taxation of spending, not income.

Really Draug, you are just fucking yourself in the ass with rejecting this ;)

Ulytau is correct. I was talking national sales tax and then following it with a "don't screw the poor" modification.

Doesn't sound like too terrible an idea, Draug.

Does a household of one get 20K then?

Yes. 20K tax free. Two incomes get 30 or my wife and I get 25 (she is a housewife). Special dispensation would be given for retirees sobthey could get the max deductible as well.

Well I can't think of a reason off the top of my head to *really* dislike the idea - it's still more favorable to the wealthy than what we have now. It sounds like the middle class is the group that's really losing out (if the rates on wealthy and poor go down, the rates on the rest must necessarily go up to collect the same amount of money).

But the Paris Hilton trust fund babies would not get the deduction because they have no discernible income and would instead simply pay property and capital gains taxes with capital gains the way I have previously laid them out. They'd more than pay their share from the interest earned on their trust funds plus the property taxes on their estates. Simplification removes loopholes so the rich would be paying more by virtue of losing their ability to dodge paying it.

You should have MANNED UP and sucked the delicious, meaty cock of apology, not carry on in your HE WAS TALKING ABOUT INCOME TAX FUCKTARD crusade after you heard it from the man himself.