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For me, the key value in a sales tax is if it equally applies to all sales. The tax (and tax rate) should be the same if I sell an hour of my time, or buy a candy bar. When money earned by providing a service someone wants to pay for it taxed differently than a candy bar, it's still an income tax with - if the low-income exclusions still apply - an even worse progressive structure than the current income tax, especially after a year of Democratic control of taxes, when the exclusion will be up so that about 60% of the people pay no 'income' (or pseudo-'flat') tax at all.

Ok... the NRST, as proposed in HR 25 and supported by Americans for Fair Taxation (AFFT) is a single-stage, single rate retail sales tax that is applied onall consumer services and consumer purchases of new retail goods (tax everything, but only tax it once). Every such good and service is subject to the tax -- no exclusions based on the type of goods or the income or other social status of the purchaser.

The tax is not applied to other transactions. Selling an hour of your time to an employer is not a retail sale, it's a sales of a service to a business -- if this were taxed, not only would it be a hidden, layered tax akin to a VAT, it would essentially be an income tax. Savings and investments are not taxed because they are not retails goods or services (service fees assocaited with personal investments are taxable because they are retial services). Used goods are not taxed because they were taxed once already.

Does this help? From your comments, it seems that you might have misunderstood the concept. Either that, or I'm still not getting your point.

There is a lot of conflicting information in this thread. Some people, for example, were talking about $40k income exclusions, etc. I'll accept, of course, whatever you define that you are talking about - but that doesn't mean I agree. Basically, if you switch to a strictly retail sales tax, then you shift the burden a great deal toward those who do not have the money to invest, to those who can't get a lot of their personal items wholesale or company paid ('company car'), etc. The obvious consequence of this - when the 'sales' tax is on the order of 28% - will be a massive black market, or the equivalent. People will "invest" in "farmer's cooperatives" where they share in "profits" in the form of meat and vegetables, and in "energy cooperatives" where the dividends are in the form of gallons of gasoline. Companies will include a company car (purchased wholesale as part of a fleet buy) as compensation to keep employees from needing to buy one retail. And so on.

For that reason, and of course I accept that you have represented HR25 correctly, I think it's a bad idea. If every transaction - whether it's that I sell an hour of my time or buy a candy bar - is taxed exactly the same, then there is no incentive to play games with what the transaction is labeled.

As I've said, I think income taxes are the worst way to raise revenue. I think the burden of taxes is dangerously loaded toward the most productive members of society and is likely to kill that productivity so shifting the burden toward something that many would consider more regressive is just fine with me. And I think the best answer of all is to reduce government spending. But for the purposes of discussion, if we are looking for revenue-neutral taxing schemes, it's at least reasonable to look out for ways to abuse a proposed system - and piling all the taxes on one segment of transactions is just asking for games to be played.

My compensation for the games that would be played with a retail-only sales tax is to use that in conjunction with a net-wealth tax. That way, things called "investments" are taxed as well (based on their net value), and it becomes a matter of mathematics to keep particular games from being productive. (If one "invests" in an "energy cooperative", as I outlined above, then the value of that investment gets taxed at a rate that makes it essentially equivalent to obtaining that same gasoline through a retail sale.)

I'd like to exclude sale of labor from any tax at all, but then what do we do with grocery stores that give away food for free if you'll pay someone $20/sack to carry it to your car (and coincidentally, the groceries are packed with, oh, $20 of food in each one)? It's not hard to play games when there are untaxed parts of the economy.