Request for assistance/information

[lostnspc86]

This isn't funny. This isn't short (are any of my posts???). If you're not into mental gymnastics and just come here to "get away from reallife," read no further.

-------

Without getting political (I believe economics are still allowed, no?), I have long held that the tax structure in the United States is in need of an overhaul.Not just revamping tax rates for this or that economic class up or down or giving rebates or whatnot.

I mean an entire overhaul of the way we collect money to run the necessary government programs.

Without taking shots at any political party or candidate (none of whom espouse this viewpoint anyway), let me make clear that I am a strong supporter instates' responsibilities when it comes to government programs not enumerated in the original Constitution. Thus, unless it's a direct benefit toall Americans, then it shouldn't be funded by the federal government. An example would be the Interstate Highway System which every American canuse versus, say, the public school system in which property owners who may not have relatives in the system pay the way for everybody who is in the system,including non-property owners.

Actually, beyond the military to protect our rights and freedoms (this is where the Interstate Highway System would fall under federal jurisdiction in mymind), and a few government agencies such as OSHA (which establishes work conditions for all workers) and the like, the federal government should be pared downand the states should be given the power/responsibility of "local" control of welfare, health care, etc.

So, even though these are "political" issues, this is more of an economic exercise without political basis.

Let's take the example of gas tax. The federal government has a per gallon gas tax that (supposedly) goes to fund building and repairs of the nationshighways and bridges. The federal tax is the same across the nation. States put an additional tax on top of that based on their needs. However, with theintroduction of hybrids, the tax becomes unfair and insufficient. The wealthy, that can afford a new hybrid now are not carrying the same burden of road taxsince their vehicles use far less of the taxed energy. Also, the tax base is lower as more and more untaxed vehicles hit the road. So a new form of tax has tobe developed while the old tax is still in place. It kills the driver of the older car because they get double taxed just to make sure the hybrid drivers gettaxed.

Now, put this example on a national scale for all taxes.

Any tax which can be estimated becomes a tax on the poor.

Raise taxes for people who make above $250,000? It's a tax on the poor. Ms. CEO and Mr. Business Owner can estimate what his or her tax burden isand adjust prices of product accordingly to make more money and maintain the same income level. The consumer (mostly the poorer people) pays the increase andthus is paying the tax.

Income taxes, corporate income taxes, estate taxes ("death" tax), property taxes, and capital gains taxes can all be estimated.

Meaning the wealthy can easily pass them on to the poor in the prices of goods and services as "inflationary cost increases."

So my thing is to repeal the 16th Amendment (that Congress can collect income tax). This would take away all of the aforementioned taxes.

Now, the government still needs money for its basic, enumerated responsibilities.

I would suggest a graduated consumption tax. (Or federal sales tax, if you will.) Now, this isn't a political stance as much as an economic stance. And asfar as I can tell isn't really the "flat tax" or "fair tax" that are political talking points, so I should still be on approvablegrounds on this site.

Keep in mind that the GAO knows how much Americans spend. We know what the budgetary demands of the services and agencies the government runs are. So we wouldknow what tax rates would have to be set in order to keep a balanced budget.

Right there is a prime reason why a consumption tax is better systemically than an income tax. The fact that the IRS would no longer be a gestapo-esque forceinvestigating individuals and small business owners on the legality of their tax deductions would be another. The fact it would be much, much, much moredifficult for an individual to cheat on his or her taxes is yet another.

I could then go into the theory that without corporate income tax, businesses would expand and jobs would be created...making more consumers, requiring moreexpansion, and generating more federal revenue. And I could add that with more money in their pockets because the government didn't take it first, peoplewould have stronger buying power and the economy would flourish. I could also add that with food not being taxed, true inflationary indicatiors would bediminished.

But let's just stick to the plan at hand and discuss the comparative advantages later.

The way it would work is that your tax is based on the purchases you make. If you buy a basic necessity (food, reasonable clothing, reasonable housing,necessary health care) you aren't taxed at all. 0.0%.

If you buy an item which isn't a total necessity but isn't an extravagance, say, a typical used car to go to work, then you get hit with a tax, maybe4%.

If you buy an item which isn't necessary then the tax is higher. So, that movie ticket may get an 8% tax.

If you buy a luxury item then you get hit with a high tax. That 72' yacht will set you back another 20% in taxes.

That sounds high initially, but remember, theoretically you're starting out with all your income in *your* pocket, not the government taking it before yousee it.

What I'm curious about and would like assistance/information on is this:

Would "you" (speaking to the readers as individuals in a collective) pay more individually under the current income tax system or under a consumptiontax system.

The reason I ask here is because I know that a wide range of incomes are represented on these boards. Even our friends in other countries than my own can thinkabout how a tax on consumption would affect them.

So here's the nuts an bolts of my request.

1) What items would you honestly put into each consumption tax bracket to make a fair representation of taxation based on a person's wealth. Make 0%, 4%,8%, 12%, 16%, and 20% brackets. Classes of items can be split. For instance vehicles can be split into used (4%), new economy (8%), large (12%), luxury (16%),and exotic (20%); food can be split in to staples (0%) and luxury (8%); clothes can be split into basic (0%), designer (12%), and fashion (20%). Whatever.those are suggestions and you don't have to go by them. Make your own classifications as you see fit/fair. It's okay to be selfish and keep low ratesfor your lifestyle, but please be intellectually honest enough to not make everything 0% and 4%.

2) When you make purchases, calculate how much federal tax you would pay on items as they fall into the categories as you broke them down.

3) Post how you broke down your tax rates and whether you would have paid more or less in taxes over the course of a pay period (look at your paycheck or 1099for what the government took and compare that to what you would have given them through purchases instead). I'm not asking for specifics on your income.Just "I would pay 22.7% less" or "I would pay 13.2% more" is all I really need.

I know it's a little bit of work.

Hell, it's a lot of work.

But you would help me out greatly. Intuitively, I believe a consumption tax would be more balanced, but I would like to have empirical proof from more sourcesthan just myself and theoretical number crunching.

Thank you;
Joel.

[GrampaMike46]

[sscont1]

Later, Steve

[Phildirt]

I was wondering where Joel was lately, and now I know. I get where you're coming from, but I just don't see it being enforceable. One man'sextravagance is another man's necessity. You would still need an IRS-like gestapo around to act as watchdogs and gatekeepers, because it would beunrealistic for people to be honest in their reporting. Define "reasonable".

That's not a 72-foot yacht, that's my commercial shrimp boat. It's just that I'm not a very good shrimper, and my nets are out beingdry-cleaned. Those Hooters girls just stopped by to discuss FairTax.org . Really.

Seriously, you make some good points, and the tax system DOES need an overhaul. And Congress needs to be more watchful about how it spends OUR money. --phil

[lostnspc86]

Phil, that's just it. There is no tax write off. Businesses pay the tax at the register just as us common folk do (remember, there is no corporate incometax in this model). There is no April 15th "IRS Holiday," no deductions, no rebates. You go to the register, it separates the items in various taxclasses (yes, this technology is already in place) and assesses the tax at purchase. Yes, there would stil be an IRS to make sure businesses were collectingthe taxes appropriately.

Of course, that's how I would ideally see it.

Define "reasonable." Hmmm. I could go political here and make a comment about certain philosophies defining "life" and "the right tokeep and bear arms shall not be infringed" to validate their own political agenda. But I'll simply say that that is what our esteemed electedofficials will be tasked to do.

Take away all their pork barrel spending funds; take away government bail outs of private sector investors; and take away the dog-and-pony hearings abouteverything and everybody from steroids to CEOs who run companies for a profit (and in a capitalist economy, no less...what audacity!) and they will have plentyof time to debate the difference between reasonable and extravagant when it comes to clothes and vehicles and such. Then, I know this is a stretch, Congressmembers can do as was originally intended: spend a few weeks in the winter doing public service, then go home to take care of their real jobs, such as farmingor running a factory or practicing law or whatever.

As a realist, I will say that "reasonability" would have to be based on price levels within each classification.

Joel.