Got a letter back from my congressman (Democrat) on Income tax

[DeathTaxesNoles]

Dear Josh:

Thank you for making me aware of your idea for a National Sales Tax. I appreciate you sharing your thoughts with me on this matter.

Like you, I believe our current tax code needs to be reformed. It is too complicated and I agree that we need to work on a bipartisan basis to significantly overhaul and simplify it. However, I have some concerns about the level of taxation which would be necessary in order to fund general government outlays and Social Security if a sales tax was the government's only source of income. Studies done by the Congressional Research Service show that a broad based national sales tax would generate $47.8 billion for each one percent levied. In 2001, the federal government will spent $2 trillion. Even if government spending was cut across the board by 20%, it would still require a 35% tax rate to generate sufficient revenue. It would take a 46% sales tax to replace the income tax and Social Security payroll tax and generate the same level of income.

I am concerned that a 35%-46% federal sales tax on top of the 6.5% state sales tax in Florida would be extremely unfair to the vast majority of the people in North Florida who currently fall into the 15% income tax bracket.

Again, thank you for making me aware of your interest in this matter. Please continue to keep me informed on matters of importance to you in the future.

Sincerely,

Allen Boyd Member of Congress

[DeathTaxesNoles]

I don't know how a Democrat won my district (2) here in the Florida Panhandle. At least he realizes the Tax Code is ridiculous.

[discostu]

Since he seems to be a pretty friendly guy see if you can get the studies he refers to. They're phenomenal proof that the overall tax rate of this country is insane (if it would require a 35% sales tax to pay for our government then government taxation is equivalent to 35% of our GNP which is a good starting point for lowering taxes).

[AaronInCarolina]

In other words, if we went to a national retail sales tax, everyone would see plain and simple just how much our government truly costs, and they would revolt against it. We can't have that!

[Hostage]

Of course he realizes it. He "feels" your pain but he offers no solution and he won't offer one unless it's an innocuous child care tax credit which in alllikelihood would be balanced by ignoring the alternate minimum tax creep.

He's basically saying:
"I know the tax code is tough and I know things would be better if it wasn't so tough but that would make it tougher on other things so let's just say as far as reform, tough luck."

[Ingtar]

I wonder where he came up with the 46% figure?

[freedomlover]

What you said. His talking points play right to the gallery, IOW his lowest common denominator voters.

[alloysteel]

Parse this out a little more. The probable basis for adopting a national sales tax would be in addition to the present burden of income taxes, and it would be dedicated to a plan of national health care. This is where this figure of "35%" came from. And he fails to make the fact known that there are two income taxes already assessed, one the "progressive" income tax, and the other the onerous and highly regressive FICA payroll tax, Social Security. This is further hidden in the fiction that the employer pays half the SS and Medicare taxes assessed on income from first earned dollar.

[doc30]

Those figures sound about right to me. When you consider that the wealthiest Americans pay the vast share of the income taxes and the bottom wage earners pay next to nothing, then averaging the tax burden as a sales tax would be similar to a flat income tax. THe rate for the bottom income earners would have to go up in order to balance the reductions experienced by the top earners if the plan is to be revenue neutral.

[Apple Pan Dowdy]

"Even if government spending was cut across the board by 20%, it would still require a 35% tax rate to generate sufficient revenue"

Well duh.... I think that is exactly the problem. And going to a "sales Tax only" would necessitate lowering goernment spending to an appropriate level. They might even have to consider eleminating government spending on all but the services actually called for in the constitution.

[laredo44]

I am concerned that a 35%-46% federal sales tax on top of the 6.5% state sales tax in Florida would be extremely unfair to the vast majority of the people in North Florida who currently fall into the 15% income tax bracket.

Your man in Congress is basically saying that the federal government is too expensive for the vast majority of its citizens.

[no-s]

It would take a 46% sales tax to replace the income tax and Social Security payroll tax and generate the same level of income....

I agree, get the studies. This is the starting point. No new taxes. No old taxes. One tax only, so we can see what we're paying everyday.

This could as well be phrased as "the federal government takes at least 46% of what we earn to support spending."

[yankeedame]

I dunno...it has the not-so-faint aroma of a "Send the s.o.b the bed-bug letter" letter. (Hopefully I'm wrong)

[Blood of Tyrants]

It would take a 46% sales tax to replace the income tax and Social Security payroll tax and generate the same level of income.

In other words, the federal government is now taking 46 cents out of every dollar you earn through hidden taxes and they DARE NOT bring it out into the open.

[RonF]

In other words, the federal government is now taking 46 cents out of every dollar you earn through hidden taxes ....

Not true. Taking 46% of every dollar you spend on retail sales is not equal to taking 46% of every dollar you earn. I spend a lot of money on transactions that would not be subject to sales tax. Mortgage payments, tuition payments ($25,000 last year), insurance payments, and I'm sure you can think of many more. That's why the figure is as high as 46%.

My effective tax rate last year (after deductions for residential property taxes and mortgage payments and charitable contributions) was about 13%, before I spent it. If you figured that percentage based not on my total income, but only on my retail spending, it would be a lot higher.

[RonF]

no-s says;

This could as well be phrased as "the federal government takes at least 46% of what we earn to support spending."

Not true. Taking 46% of every dollar you spend on retail sales is not equal to taking 46% of every dollar you earn. I spend a lot of money on transactions that would not be subject to sales tax. Mortgage payments, tuition payments ($25,000 last year), insurance payments, and I'm sure you can think of many more. That's why the figure is as high as 46%.

My effective tax rate last year (after deductions for residential property taxes and mortgage payments and charitable contributions) was about 13%. That was on my income, before I spent it. If you figured that percentage based not on my total income, but only on my retail spending, it would be a lot higher.

[RonF]

no-s says;

This could as well be phrased as "the federal government takes at least 46% of what we earn to support spending."

Not true. Taking 46% of every dollar you spend on retail sales (the basis for sales taxes) is not equal to taking 46% of every dollar you earn. For example, I spend a lot of money on transactions that would not be subject to sales tax. Mortgage payments, tuition payments ($23,000 last year), insurance payments, and I'm sure you can think of many more. That's why the figure is as high as 46%.

My effective tax rate last year (after deductions for residential property taxes and mortgage payments and charitable contributions) was about 13%. That was on my income, before I spent it. If you figured that percentage based not on my total income, but only on my retail spending, it would be a lot higher.

[no-s]

Not true

How shall we analyze it then? Why do you think it's a false equivalence? I can't decide because the facts are not in yet.

But I am mistaken because the 46% is tacked onto the price. So in the static analysis we have to pay 146% of the price, which means the tax part is roughly a third. A dynamic analysis would have the tax depressing earnings in a number of ways as the demand coordinate modulates the price.

[RonF]

Why do you think it's a false equivalence?

I think it is false to equate a 46% sales tax on a 46% earnings tax because I don't spend all my earnings on retail sales. If I make $50,000 a year and am taxed 46% on that, my taxes are $23000. If from that same income I spend $10,000 on housing, $3,000 on car payments, $1,000 on a life insurance policy, $4,000 on utilities, and the rest ($32,000) on retail sales (including the sales tax, because that's all them money I have left), my tax is approximately $10,000. Now you can fudge the numbers around some, but that $10,000 isn't going to become $23,000 because the $32,000 isn't going to become $50,000.