Posted on 09/04/2004 9:13:17 AM PDT by WileyC
It seems like everyone has heard of the idea of a nation sales tax, but few people have looked at the idea in depth enough to really know about it. While the potential benefits are many, I'm just going to focus on two areas that are hardly ever mentioned: criminals and the current trade deficit.
Criminals
One of the great flaws of a federal income tax is that those who live 'outside' the system, criminals including illegal aliens, never pay into the system. They reap all the benefits of being an honest citizen without ever paying a single dime towards the rest of us who support them.
With a national sales tax, criminals of all stripes would be paying us, the other taxpayers, a premium on all that illegal income... no matter whether they are petty thieves or mafia dons. They still have to eat. They still want to buy nice cars. It's ridiculous to claim that they would find a way around a consumption tax because they would have to convince hundreds or thousands of merchants to cheat rather than just laundering the money once as happens under the current system.
Along the same lines, illegal aliens would suddenly find that somewhere between 17% and 21% of whatever they purchase would actually go toward the highways they use, the hospitals they frequent, the schools their children inhabit (on the university level... but if a state did the same thing then also K-12). This argument alone may cause states with illegal immigration problems (e.g. TX and CA) to support the constitutional amendment.
As an added bonus, the refund checks that honest Americans would be receiving wouldn't go to those outside the system. Illegal aliens would be paying a full share, while the rest of us would only pay on the amount over the poverty level. And can you imagine that criminals would want their names to go on a list that can perused by law enforcement officials? I doubt it!
Trade Deficit
Under a NST, for the first time, all exports from this country would be on a level playing field with the products produced locally in nations we export to. Think of it: suddenly all our products would cost 20% less than they do now in every country on the planet. Imagine the enormous boom to our economy as demand for US products screams past all previous records. Unemployment would plummet and real income would rise as the demand for skilled workers skyrockets.
In addition, imports into this country would be facing a very different market. All the 'hidden' taxes on all our products would be gone. There would just be the NST that would be applied equally to imports and domestically produced items. Basically, the costs of domestic products would drop by 20% (by current estimates) which would just balance out the increase in cost due to the National Sales Tax. But imports would keep all their current imbedded costs including their VATs, corporate taxes and shipping costs. This would encourage a flood of capital into this country, producing even more new jobs for Americans.
Epilog
I wanted to keep this short, so I'll be brief (basically, you can ignore this section if you've read the rest, heh.)
While I dream of a NST to help the country as a whole, can you imagine if states, seeing what a fantastic job it is doing on a national level, decided to try it on a local level as well?
Once again, those hit hardest would be illegals (both alien and domestic) while the rest of us would be smiling a their dismay. There would be almost literally no escape from them paying taxes. The best NST is called the FairTax but it is fundamentally UNfair... to criminals.
"A 15 percent sales tax on the final purchase of goods and services at the retail level. The NST would be similar to state sales taxes. The rate should decline in future years to 10 to 12 percent as economic growth allows more revenue to be raised at a lower rate and government downsizing continues."
-- cato.org/pubs/pas/pa-272es.html
This is exactly the problem with a National Sales Tax -- the actual percentage is very fluid. You say 20%, and the Cato Institute is talking half that.
Well, what is it? Do NST advocates just make up some number that the public will vote for, then oops, we need to make that 23.4% instead of 22.1%? (hey it's only 1%!).
Nope, in an 11 trillion dollar economy, it's too easy to raise tens of billions with a simple half-percent increase.
And I think we can expect at least the same amount of fraud, if not more.
Oh, you know that SUV you were going to buy for $50K? It's now $60K with the NST. BUT, if you're interested, it's only $50K if it's "used" (no NST on used purchases). So, the dealer drives it around the block, sells it as "used", and you give him $50K (plus $2K "tip"), and everybody wins.
Except the U.S. government, which is surprised at how little revenue they're receiving, and must (again) raise the NST another 2% (hey, it's only 2%, quit your bitchin')
Then you have TWO tax systems. THANKS A LOT!!!
paranoia setting in? The IRS needs to be disbanned and closed, saving an instant 125 billion. Then the NST or Flat Tax can be implemented, either one will give us more money in our pocket, no forms to fill out April 15th and definately a fairer tax across the board.
Private list. Hey B4 do you like the new name?
farmfriend are you following the fair tax with a ping list now?
& pimg
I don't think most drug dealers will collect and pay a sales tax so that segment will still avoid taxes.
BTTT!!!!!!
That is the reason I'm for some sort of "National Sales Tax". It closes all the loopholes. A flat tax would continue to let the criminals off the tax-hook.
The 30-40% rate doesn't scare you?
I'm paying that or more right now. At least I'll have more say in what taxes I pay.
Once the market works through this, prices start dropping. Companies no longer have to pay the cost of having their taxes prepared. They no longer have the paperwork associated with income tax, so their paper cost goes down. So, the cost of products will return to about where they were, or a little less, and you get to keep your entire check, instead of getting part of your check taken before you go out to pay the same prices.
No, but drug dealers who probably aren't paying income tax will have to pay the sales tax whenever they buy anything like jewelry (a drug dealer favorite), cars, food, houses, etc.
One of the great flaws of a federal income tax is that those who live 'outside' the system, criminals including illegal aliens, never pay into the system. They reap all the benefits of being an honest citizen without ever paying a single dime towards the rest of us who support them.Aledgedly they are paying hidden "embedded" taxes on the products they purchase now. The theory is that when these alledged taxes are removed, prices drop, and the added sales tax doesn't cause the gross payment for goods to go up.
Under a NST, for the first time, all exports from this country would be on a level playing field with the products produced locally in nations we export to. Think of it: suddenly all our products would cost 20% less than they do now in every country on the planet. Imagine the enormous boom to our economy as demand for US products screams past all previous records.Any change in US prices would be quickly negated by adjustments in the exchange rate. The benefit to our trade would be very short lived. In the meantime US consumers and business are paying more (not including sales tax) for imports.
My point is that the NST (combined with state and local taxes) on a $50K purchase is a temptation to fraud.
Thanks for the ping. No doubt, the national sales tax is a tough, complex issue.
I do agree with LtGOP's tag line that taxes should be voluntary. The NSA is really an excellent way of bringing about such a situation.
First lets deal with some of the negatives.
Indeed, the NSA is most certainly regressive. For those who make very little and do not pay federal income tax, this may very well take a large chunk out of their disposable income. It is necessary to recognize the potential hardship of such a situation and it would also be in the common interest to make some sort of provision for this problem. It may very well entail raising the minimum wage among other things. Until we address this fundamental flaw this very worthy concept will go nowhere. You can choose to dismiss this issue, but are then denying the reality of the situation.
A second serious problem would be the consequences to revenue of a recession. Whereas current recessions do bite into government revenue through lost income tax (among other things), the drop would not be so severe and reinforcing as the tendency of people to cut consumption in times of economic uncertainty. When this happened (because we cannot alter the business cycle) there would be a negative feedback loop in which the government would truly be starved of funds and the economy could very well tank as people increasingly cut consumption (in effect cutting their own taxes).
I am am certain, however that clever solutions to these problems could be found but with the second more troubling than the first.
I also beleive that such a form of taxation would cause individuals to immediately reduce consumption and save more. This is necessary as the United States ages and the likelhood that global epicenter of consumption will shift to China and India. In other words, the investor class would grow. An America capable of financing its own investments in these huge markets will be a wealthy and prosperous country.
In other words, America may very well become a nation (like Japan and Germany) with a trade surplus. This functions best when the population has a very high savings rate and a national sales tax, among many other benefits, would likely lead to this outcome.
A quick dismissal of a common criticism: No, corporations would generally not lower prices if they did not have to despite their tax cut (actually there may be no real tax cut because corporates would have to pay the sales tax too and probably end up paying more than they currently do in income taxes. Yes, they would increase their profits. However, this would be a 1-off action and only on those goods that are the most elastic in terms of price. For inelastic goods, the prices would almost certainly have to come down. Two additional positives for corporations would be Investments in efficiency and dematerialization would increase and offshoring would become irrelevant.
Looking forward to discussing this further.
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