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National Sales Tax vs. Income Tax

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Posted by: barry2952

How do you all feel about a National Sales Tax vs. the current insane Income Tax system.

I believe that an NST will tax people according to their spending habits and it should diminish the "underground economy" that fails to add to the tax base. I own a business and I am an employee of that business. Excessive taxes are taken out of my paycheck to cover the tax cheats. I resent that.

A tax on what you spend eliminates the need for the government to know where you got your money.

Posted by: CaptainZilog

I like this idea. Although then you have to force Use Tax on anything entering the country (I think this is done anyhow, but it's generally overlooked until the price is pretty high).

Posted by: Joeychgo

the "underground economy" you refer to is HUGE --

It goes beyond simple tax cheats ---

~Hookers
~Drug Dealers
~Theives

None pay taxes.

Also the straight guy ~~ Like an electrician who does a little side work now n then........

Not to mention the bump from people who travel TO this country for school, vacation, etc.

Posted by: barry2952

With this plan they would all pay taxes. The business would pass the tax money on just like they do now. There would no longer be money "on the side" because it's only taxed if you spend it. It wouldn't matter how you made it.

I believe it would save the billions of dollars wasted by our current tax system. I believe the IRS is funded to the tune of 8.2 billion dollars. What else could we do with 8 billion dollars?

What level of NST would you be comfortable with?

Posted by: Joeychgo

well, we wouldnt save the 8 billion entirely, but alot of it, sure. We would still need an irs to process ths sales tax returns and corporate taxes, although alot of this is already handled by the states..........

I dont know what I would be comfortable with. ANyone have an idea what we would need it to be to break even??? Anyone wanna do the math and research?

Posted by: Kbob

I certainly don't claim to know much about taxes. As long as I don't have to pay any more than I do right now and it's ultimately fair, then it really doesn't matter to me. A side benefit would be a slightly smaller government as well. I just wonder how much this would affect peoples' spending habits, which is really the driving force of our economy. It may lower peoples' spending, thus lowering our entire economy, which would lower wages, etc. But that's just an uneducated guess.

Posted by: Joeychgo

It would a little adjusting, but it shouldt make much difference since people would get their full paycheck as there would be no need for witholding.

Posted by: MonsterMark

Quote:

Originally Posted by barry2952

What level of NST would you be comfortable with?

9 % ~ NST
3 % ~ State Sales Tax...all states
4 % ~ Social Security
4 % ~ Individual retirement Account separate from SS
2 % ~ Medicaid, Medicare
22 % ~ Total

Nothing else. No deductions.

Posted by: Joeychgo

Found this:

Tax Reform: National Retail Sales Tax Act
Dateline: 03/20/98

Last week, we took a look at the Armey-Shelby Flat Tax proposal (H.R. 1040) that would tax 17% of the income of all taxpayers, no matter the source of that income and put the entire tax return to a single post card.

The other tax reform proposal to make to the point of actual "billdome" was H.R. 2001 (H.R. 1325) - The National Retail Sales Tax Act sponsored by Congressman Dan Schaefer (R. Colorado).

How a National Sales Tax Would Work
Besides imposing a sales tax of 15% on "the gross receipts from the sale of any taxable property or service sold in the United States.", H.R. 2001 would affect these two sweeping changes:

The Income Tax would be repealed - as would all estate, gift and non-trust fund dedicated excise taxes.
The IRS would be abolished - as of FY 2001 with no successor agency established.
The 15% tax would be collected on all goods and services sold at retail. Things like utility bill payments, legal fees, golf lessons, and video rentals would be taxed.

Basically, the money you make -- your income -- would not be taxed at all until you spend it. Capital gains and income from investments would not be taxed as long as the money is reinvested. Contributions to charities would not be taxed -- a 100% deduction under the income tax.

Federal taxes would no longer be withheld from your paycheck. There would be absolutely no -- zero -- forms to file. Instead, you would pay your taxes directly to the cash register of every store you shop in. (Social Security deductions would continue.)

Exemptions?
No sales tax would be collected on any good or service purchased for resale, purchased to produce a good or service for resale, or items to be exported from the United States. The reasoning here is that if you tax the sale of items used to produce items that are to be resold, the initial tax would become hidden in the price of the final product.

What About Businesses?
Business would pay not taxes, only collect them. That's really the way it works now. Business just pass the their taxes along to consumers in the form of higher prices.

Other Benefits of the National Sales Tax

Cost to file - No cost to individual taxpayers
Complexity - Individuals do not file a return
Hours to Comply - zero (0) hours for individuals
Penalties - None for individuals
Savings - Dramatically increases savings
So, What's Wrong with the Sales Tax?
According the promoters of the Flat Tax, two things: First, a National Sales tax would require that two-thirds of the House and Senate, and three-fourths of the states vote to repeal the 16th Amendment that created the Income Tax. (Congress cannot create a new national taxing authority without abolishing the existing one.) This, according to Flat Tax supporters, could probably never happen.

Second, Flat Taxers say a sales tax is hidden and too easy for the government to increase. Consumers are never sure exactly how much state and local sales tax they are paying now, thus creating less resistance to increasing those taxes.

Which Plan Will Win?
Only a very, very long time will tell. During which, we'll keep paying income tax to the IRS on 1040's, 1040A's and about a gazzilion other forms not even created yet and hating every second of it. Either plan, flat tax or sales tax, would require massive amounts of daring legislation and have a drastic and pretty unpredictable impact on the American public and economy. Indeed, the passage of either plan would require a a movement of government unseen since "The First Hundred Days" of President Franklin Roosevelt.

Current Status of the National Retail Sales Tax Act
The Retail Sales Tax Act (H.R. 2001) has been in the House Ways and Means Committee since 6/19/97.

http://usgovinfo.about.com/library/w...=2761&cob=home

Posted by: CaptainZilog

Watch out for flat taxes. There either needs to be a decrease in the cost of living supplies: food, electricity, housing, water, or a level at which the flat taxation begins.

Posted by: MonsterMark

Quote:

Originally Posted by CaptainZilog

Watch out for flat taxes. There either needs to be a decrease in the cost of living supplies: food, electricity, housing, water, or a level at which the flat taxation begins.

I'm OK with that idea, as long as there is some amount of payment. Nobody, that means nobody, should get a free ride to live in this great counrty.

Posted by: Joeychgo

I dont think the 15% would be enough, I think it would have to be closer to 18-20% -

The one problem I see would be elderly who live off SSI and the otherwise really cash strapped (i.e. unemployed, disabled, etc)

Posted by: CaptainZilog

Well, the whole idea of the NST is to rid us of the income tax. So make the SSI payouts larger and charge the same tax. It'll have the same effect, with none of the loopholes.

If a NST is to work, it has to be charged across the boards. But what about churches, charitible organizations... I think people use those as loopholes with the current sales tax. The loophole that would be created in the instance that a NST were enacted would be pretty severe. I think that charitible organizations would have to file for reimbursement from the IRS at the end of the year. That way the purchases can be scrutinized and are a matter of record.

A flat tax would be ok, except the people making $30,000/yr and below would be pinched pretty hard. I like the idea of a higher sales tax. Even a 20% sales tax, and an elimination of the income tax, would be best. In a material world (USA) why not tax materials and not income, the very life-blood of companies (via purchasing)?

Also, since I'm on a tired rantish mode, let's decrease the size of the government like was mentioned before. A small, agile government is what we need in an era of rapidly changing technology and free flowing ideas.

Posted by: barry2952

I believe that the NST would encourage savings, which has always been the backbone of a successful society.

Again, I am tired of footing the bill for tax cheats. This plan would eliminate that whole segment of society and make the "underground economy" pay their fair share.

If a drug dealer bought a decked out Hummer for a $100,000 he would pay 20% in NST generating $20,000 in taxes. They would currently only pay $6,000 under Michigan's sales tax rate.

As far as it being unfair to people on fixed incomes: I would disagee. Old and poor people spend proportionally less so they would have a lighter burden. Maybe there could be a provision for a senior citizen discount like there is at restaurants.

Posted by: CaptainZilog

I was referring to a flat tax in that instance, Barry. An NST would work better for the poor.

Posted by: Topcat

I think you guys are making up numbers as you go along , to make it sound good..If like in NY the state gets 8.5% sales tax , if you are using 15% NST you would have to add it to State Sales Tax or you would bankrupt the states....If you took the state out of the NST , at 15% NST you would have only 6.5% of what you spent , left , to fund SS and all Gov Spending...The Democrats would have nothing to spend ....The feds are taking 30 to 50% of you salary now to finance its operation..You are asking the Gov to use 6.5% of what you spend instead of 30 to 50% of what you make , even if you are including present non payers I dont think the numbers work... and SS is 7% deduction..
I think a flat tax might have a chance , if the exempt people , can be worked out fairly..I do agree though the tax system as we know it needs reform... There are way too many loop holes , and the people who can afford to pay , have the money to find and apply the loopholes , which makes them pay the least as a percentage of income.. Flat tax say 20% of income , using gross income , not taxable income ..Thats probably what the wealthy are shooting for anyway , and would be a reduction in the middle class , the biggest part of the workforce..

Posted by: Lincolnman

I with you TC. Flat tax 20%

Posted by: Randeaux

Thank the Lord! Finally! May God send a deluge of blessings your way Topcat! Whenever I talk to anyone else of proposing a flat tax rate, they act like they want to call the state hospital and report me as a missing resident.THANK YOU! Maybe I'm not from the land of the lost after all!

Posted by: barry2952

Our group met with Michigan State Representative candidate Bill Largent today and I asked him specifically about the NST and the magic number is 22.5%. No forms to file, no withholding, no CPA's, tax services or IRS. You would get to keep everything you earn. How you choose to dispose of it is your choice. The states would be funded out of this pie as would all other government functions.

The tax collection system is already in place. Auditing of financial dealings would fall on the shoulders of business; already collecting sales tax. It should be significantly easirer and more cost effective to keep businesses in line than individuals.

Instead of paying for individual audits I'd rather pay for enforcement of the tax collection system. I'd rather see less government intrusion into our daily lives. This basic change in philosphy is already effective in Europe. We tend to follow European political and financial trends by a few years.

A change to an NST would effectively eliminate the underground economy because no one would care where you got your money from. What's wrong with that? Everyone would pay their fair share.

About churches and charities. What does it say about our committment to do good things if the only reason that we donate is to get a tax deduction? Will you really stop giving if you lose the deduction? People really dont realize that the deduction isn't really that big a deal. If you donate $100.00 and you are in a 35% tax bracket, you've only saved $35.00. With an NST there will be more money left for you to give away, or not. Again, your choice.

I'm not quite sure what the plan is for the very poor. I wouldn't want anyone to go hungry but typically the poor would receive more in government benefits than they would pay in a 22.5% NST.

I still believe that the current tax system unfairly burdens the middle class and is in part responsible for decimating the American dream. The top 1 percent of American income starts at $1.2 million. That taxpayer saved $78,000 a year with the recent tax cut. WTF does a guy making $1.2 million need with another $78,000?

The tax cut netted me about $300.00 a week extra in my paycheck. Unfortunately, I've had to cut my salary in half to insure the health of the company in this recession. What did I gain?

I dont believe that I am better off than I was 4 years ago!

Barry

Posted by: 92 Arizona Towncar

why not get rid of the tax once you turn 70 or something? I know for me personally, paying taxes for 50 some odd years, then not having to pay after 70 would be the graetest thing... Essentially, you've paid your dues, now it's time to not worry about money, but relax and enjoy retirement...

Posted by: barry2952

Why should someone who turns 70 get a free ride? People over 70 consume vast resources due to health care costs. Why shouldn't they participate in their support. I guarantee you that the elderly get back far more in SSI benefits and Medicare benefits than they would ever lose with an NST.

What about wealthy 70 year olds? Should they get a free ride? By the time you're 70 you should have everything you need in life so you'll be spending very little on the NST. Problem solved.

Barry

Posted by: Randeaux

Good point, the question here also is, (and from what I've seen,this issue affects a good percentage of us!) WHAT ABOUT THOSE OF US IN OUR 20'S AND 30'S WHO WILL NEVER SEE ANY KIND OF SOCIAL BENEFITS WHEN WE HIT 70(or earlier)YET CANNOT RETIRE BECAUSE SOCIAL SECURITY WILL RUN OUT BY 2037 (WHEN I WILL BE 65) YET ANYONE WHO HAS A JOB, HAS TO PAY FOR THE PREVIOUS GENERATIONS OF CITIZENS TO AN ACCOUNT OF WHICH WE WILL NEVER, EVER SEE THE BENEFITS OF? THANK GOD I HAVE MY HOME AND A 401K/THRIFT SAVINGS PLAN! HOWEVER, IN 2042/3 WHEN I AM ABLE TO RETIRE, WILL A MILLION DOLLARS BE LIKE $100,000 OR MORE LIKE $10,000 ? (look at me,I'm so steamed,I can't even get my point acrossed right.) (there I go again!

)

(SOMETIMES I GET A LITTLE OFF POINT---Sorry!

)

Posted by: 92 Arizona Towncar

That's why you gotta plan now... I'm living witht he idea that SS will not even exist for me when I retire, and I feel sorry for those who aren't planning now... and why not get a free ride after you're 70? If I've been paying taxes for those who are older than me, well now the people who are younger can pay for my wrinkly bum...

Posted by: Topcat

Randeaux
I am 57 , and not planning on SS for retirement at all , the amount you receive doesn't mount to a hill of beans anyway ... You must start planning at your age , a little at a time , and leave it alone . You will be amazed at how much accumulates by retirement..You must support yourself at retirement , and your wife , remember when you are gone she only gets the highest of the two SS not both ...Don't depend on the government they aren't reliable..
I still don't think the numbers work in reality with a 22.5% sales tax , but i would need to here a lot more real #s , to verify if the NST plan is a viable one. Without real #s , in theory any plan can be made to sound good...

Posted by: Randeaux

In 1991, when I was 19, I was approached at my job at the time, and the issue of starting a 401K was brought to my attention. Needless to say, I was boiling mad inside

WTF is "Lisa" talking about!?!WTF I haven't been out of high school for a full year yet! Has she lost her Fing mind!?!) I guess you get the point. I went to go see my Father after work, on the verge of tears,explaining how insulted I was that my boss would even mention such a thing! (Mind y'all, this ended up to be one of those "life-lesson" 4-hour discussions,). Well to make a long story not-quite-so-long, thanks to my then boss and my Father, today I can safely say that if something should happen to me, and after those I.R.S. Hyenas get their share of my thrift-savings,(IRA?)and what I'd saved in that(and subsequent) 401K accounts(penalties included) I could pay off all debts (except the house) and even then I can handle an apartment and sell the house(if I had to!) I'm glad I had that talk with POPS! Hopefully, what I'll accumilate over the next 39 years of employment (I'll retire@71.)will be adequate.