What Do You Say About Dumping Our National Income Tax And Switching To A National Sales Tax?

Consumption is discouraged with a national sales tax. That’s good for the environment, but bad for the economy.
Investors in Roth IRA would be screwed since they’d be paying taxes twice on the money invested prior to the change.
Poor people would be hit harder than those of us with money.
Industries that benefit on tax write-offs such as housing would be hit hard as the tax benefit of owning a home would be gone.
If anything like this was ever to work, it’d have to be eased into the economy over decades.

Alex – My Trader’s Journal’s last blog post..Covered Long Stock Positions – DIS & VIP

I love it. Sure there will be problems during transition and that needs to be managed, but to me, the biggest benefits are that it encourages savings and investment. One thing I would like is to exempt assets purchase from this tax, such has house or securities. This will additionally encourage people to move towards the so called ownership society.

And since there is no dividend or capital gains tax in this model, more money will be reinvested in business and will spur economic growth

I think the concern about consumption dropping and causing problems in the economy is probably unfounded. People will always consume the necessities, and the rich will always buy luxuries (which are typically price in-elastic)

Poor people will indeed be hit harder as they have less discretion on their spending choices but if it causes them to review their budgets and start investing, it is for their own good. This may not seem fair, but is infinitely more effective then giving them a tax rebate handout (disproportionate to the taxes they have ever paid) and then ask them to consume to keep the economy humming.

You will of course destroy the tax accounting and tax lawyer businesses and that may be a negative in some people’s eyes

Underground economy is a distinct possibility and a problem. The other problem I see is the government profiting in the era of high and rising commodity prices, which appears to be unethical.

But overall, I support the flat sales tax system as probably the fairest system out there

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the national sales tax sounds great until you really do a thorough analysis on it. It is still a regressive tax. Since it is proposed to be revenue neutral, which means the govt. still gets as much revenue as they did before, the middle class gets hit the hardest. Proponents of the “fair” tax admit this. The reason is, the ultra rich make a lot of their money from capital gains – money from investments – which will magically no longer be taxed under the fair tax system. Who picks up the tab? Not the poor…
not so fair is it?
Since the income tax only pays interest on debt to the Federal reserve, and if we did away with it, the government would still have as much revenue as it did during the Clinton administration (still too much….) I think we need to do away with the income tax and replace it with NOTHING. Email me if you wish to discuss.
Ron Paul 2008!!!

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I hate it. What’s wrong with no tax. The myth is that the government can’t survive without the revenue derived from the income tax. Just a simple cut in spending back to the level of spending in the 2000 budget would allow elimination of the entire income tax without having to replace it at all. The other big myth is that for the government to cut spending they have to cut programs to which people have become addicted and can’t survive without. Foreign aid, corporate subsidies, and pork barrel spending should be cut today.

Elimination of the income tax while substituting a new tax is not a benefit to anyone. It simple shifts the burden. There may be some instances where people are made to pay under a new tax but for the most part there will always be the loop holes created by those who create the tax. On top of everything else, shifting to a national sales tax will not eliminate the IRS, it will only shift their mission. A whole new agency of abuse will be created with collection mechanisms that make current ones look mild.

@ Arohan – “Poor people will indeed be hit harder as they have less discretion on their spending choices but if it causes them to review their budgets and start investing, it is for their own good.” Were you born with a silver spoon in your mouth? Have you ever met a poor person? Review their budgets?!?! They have no budgets. They live paycheck to paycheck and just try to have enough to pay for food and rent. I’m not talking about those who are out spending money on drugs or plasma TVs, screw them, but don’t take the good people down too. Most who are poorer either do not have the education to understand investing and how to budget or quite possibly are not smart enough to comprehend. I’d assume those reading this blog and most of our financial blogs are a good bit smarter than the average person. Should those with “subprime minds” be punished financially because you want more sh/t for your house? Broaden your vision, you might even find a way to profit from it.

@ Robert and Hank – Are you serious, no tax? Would roads, public schools, police, EPA, etc fund themselves by printing money and causing greater inflation. Have you actually thought about it more than “I wish I didn’t have to share my wealth”?
I’d be fine with paying 50% tax if it meant less people suffered. I would still be pissed at those who abuse the system and stay on welfare too long, but my life is still better than theirs, even if I’m giving away a large chunk of MY money.

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@Alex – I’m not saying that I’m in either ship – I enjoy it because it is just an interesting topic to think about. I understand the roads, schools, police, etc are going to get hit under the NO tax side, just like the entire tax profession is going to see a drastic change in the National Sales Tax system. BIG changes would have to occur for either to happen, but what I find interesting is the discussion itself.

We’ve been using the same tax system for many many years and I honestly don’t see it changing anytime in the near future for such simple reasons as this post right here. We’ve had 10 comments that don’t like flat tax, no tax, OR current tax. It would definitely be hit with opposition from all sides, because all sides would drastically change the current situation and that in itself would generate some major buzz that really hasn’t started happening yet…

To save all of us some research time, please post the links. I’d like to see where the money comes from to pay for the war too. I thought income tax was used to pay for “stuff”. I have a couple of more reality TV shows to finish before I can spend my time on it.

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I would have to respectfully disagree with the first comment on the board – consumption is not necessarily discouraged by a national sales tax. If anything it would be encouraged because people technically would have more out-of-pocket money to consume with. When you consider the fact that Canada has operated with a national sales tax for a very long time and they not only have a single-payer guaranteed health care system, as well as excellent schools and clean neighborhoods, it seems that the national sales tax might be a great way to turn our society around. Another thing worth mentioning is that Canada is not currently experiencing the gross misallocation of wealth that the United States is currently within the throes of. America has been on the wrong track for a very long time. National sales tax might bring us back to a fair balance of paying for government programs AND decrease the need for such hefty government bureaucracies.

Why is it when these tax plans/scams are discussed there is never the mention of reducing government. None of the plans – flat, sales, etc. are designed to reduce the burden on the American tax payer. They are only designed to shift the collection mechanism and facilitate a more “gentle” rape of the citizens.