Wait just a darned minute ! If there IS a consumption tax, on everything, then there WOULD be a tax on what is bought to construct a house. Since I was talking about an already built one, though, one built prior to the introduction of a consumption tax, you've managed to strengthen MY side of the argument AND proven that a consumption tax would then make buying the house more expensive than buying one under today's ( which needs fixing and lowering ! ) income tax situation.
The article says absolutely nothing about property taxes, state taxes of any and all kinds, being done away with ; just a change in the FED GOV system of tax collecting.Neither does it claim that a consumption tax could never be increased. It could and it would be.
All in all, not that many people get audited. Have YOU ever been ? I have and we did nothing wrong. It's inconvenient, a pain in the neck, but not the end of the world.
The Fed Gov can't do away with local property taxes. That's a state's perogavtive and is not even a state doing this, but a local community.
The majority of states have state income taxes and N.Y.C. even has a city income tax. This article and the vast majority of posters totally ignore these saliant facts! Also being totally ignored, are the local sales taxes, which in Chicago and N.Y.C. are almost 9% of most purchases. Since a 25% consumption tax, on top of all of that, would be close to 40 % taxation and NO ONE, not even the highest tax rate level, is that high, this would be punishing. BTW, nowhere, in this article is a rate even mentioned. For all we know, it could be a 20 % or a 25 % or a higher rate. What if it's 30 % ? Where's the tax saving then, for most people ?
First, you are missing a critical part of the consumption tax. It is just like any retail sales tax. Example, let's say you own a gas station and you want to buy sodas to sell in your station. You do not pay sales tax when you buy it because you are tax exempt - you only charge the tax when it is sold in your store. There is no double tax. Same thing goes for manufacturing, and at the heart of it, a home is a manufactured product.
In theory, if set correctly, the taxes paid by an individual under a consumption tax or income tax would be identical. Let me provide a simple example. I earn $100 a year. Income tax is 25%. Therefore, I pay $25 in tax and can by $75 in product.
Now, let's say I earn the same $100 a year. Consumption tax is 33%. I buy a product for $75. The tax is $25.
See, there is no difference (if taxes are changed appropriately). My earnings are $100 in either case. I get $75 in either case. I pay $25 in tax in either case.
The difference is compliance costs. Let's say that compliance cost for an individual is 10% of income taxes, but for a business it is 5% of consumption taxes (increased efficiency) - in fact, I would say that since all businesses are already processing sales tax, there would be relatively little additional cost in asking them to include a federal sales tax to their local sales tax, all-the-while eliminating all individual taxpayer's compliance cost.
Also, the fed could do away with local property taxes. This doesn't mean they will, but they can.
Here's my concern. Govt's need a certain amount of money. They know people will be pissed if they collect it all in one place (because it is an enormous amt of money) so they split it up in all different kinds of taxes. There is a cost in collecting each tax. There is no question that a consolidated tax collection methadology would dramatically reduce the cost of collecting a tax. It would also dramatically reduce the taxpayer's time and financial cost of delivering the tax to the taxing authority.
I don't understand why you argue that changing an income tax to consumption tax would increase your taxes (it clearly depends on what the tax rate is) - it does not matter in any shape or form what methods and rates local govts use to collect revenue.
I do agree that local taxs in some communities are outrageous, but it is still additive to the income tax.
For example, look at your NY example. Case 1: 25% income tax 9% state sales tax. $100 - $25 income tax = $75. $75 / 1.09 = $68.81. This is how much product you can buy with your initial $100 in earnings.
Case 2: 25% Federal Sales Tax + 9% State Sales Tax = 34% total tax. $100 / 1.34 = $74.62.
You get to buy almost $6 more in product. In order to get the same amount of product, the federal sales tax would have to be $100 / 68.81 - 1.09 = 36.3%.
It's all symantics and you are either falling into the trap or spewing the trap for others to fall into.
Undeniable Logic