You eventually spend every dollar you make — or else you lose it somehow. It’s not useful as wall decoration.
Under the current tax system, you got taxed when you earned it. If you then replace part or all of the income tax with a sales tax, those people who have money in the bank that was already taxed will now pay tax again when they spend that same money. To be fair, you have to have some way to deduct from the 9% sales tax money that is spent from current savings. Unfortunately, that would be a complicated task (it can be done — do a one-time survey of people’s life savings, and then allow them that much deduction on their income taxes, spread out over the years like the cap on capital losses).
“You eventually spend every dollar you make — or else you lose it somehow. It’s not useful as wall decoration.”
Cain’s tax plan encourages savings and promotes the really big buys. No one is going to be spending every penny they take in unless they’re like the U.S. government with a severe debt problem.
“Under the current tax system, you got taxed when you earned it. If you then replace part or all of the income tax with a sales tax, those people who have money in the bank that was already taxed will now pay tax again when they spend that same money. “
Which is already the situation, except we’re paying for the taxes the federal government imposes on businesses through the cost of goods we buy.