MACS wrote:Here's the problems I see.
Politicians say rich people should pay more taxes, yet they're all rich and refuse to scrap the 700+ page IRS tax code which provides them with all kinds of loopholes so they don't pay taxes. That same tax code allows poor folks to either pay nothing, or in extreme cases actually get money from the earned income credit - having contributed nothing.
So the candle is burning at both ends for the middle class folks. Rich ain't paying, poor ain't paying... and we wonder why we're 19 trillion in debt.
Scrap the IRS and the tax code. Institute a 10% federal sales tax on anything that is not food/clothing. Nobody can lie, or cheat to get around it. No write offs, no loop holes.
Everyone pays 10%, including dope dealers and jagoffs working under the table. Rich people buy more stuff, more expensive stuff, and will pay more. People will have more disposable income because they won't be taxed on it.
It'll never happen. Why? Because the politicians will reject it, and claim it'll hurt the poor when in fact it'll hurt the rich by making them pay more and closing all their ways to cheat.
MACS... I used to think this was a good idea as well... But it doesn't quite fit to me (at least not at 10%)...
Now I can only speak to my own life and situation, but I can think through my life and habits, and compare when I was young to now. I earn 10x what I did in my early 20s... but my purchases are not 10x higher. The main increase over the past 20 years is my housing (first rent, then mortgage, then rent again)... I can tell you I pay 10x higher rent than I did in my 20s... but I'm not buying 10x more expensive stuff. Simply put, when you're at the higher end of the pay spectrum you will generally have a lower percentage of your total income go towards buying "stuff". That can be seen by saving rates. The very low income people (let's say 25k and lower) probably have 100% of their income going to buying things (we will assume for argument's sake that all these things are necessary) in this case, a 10% sales tax will tax those people 10% of their income (minus rent). When someone moves up a bit more and is able to save some money, let's say they save 5% of their income.... then they are spending 95% of their income , and only being taxed 10% on 95%. This will continue up the economic brackets.
Yes, after you get up out of the very poor this becomes attractive, because you're taxing people based on their frivolity. It's practically like they're voluntarily paying taxes. But at the bottom level of income, where the highest percentage of a person's wages is spent, and the highest percentage of that spending is on need based stuff (ie, buying kids clothing at WalMart instead of Neimann Marcus), those are the people who would be paying the highest taxes as a percentage of income.
And I'm pretty sure that even if we decided to screw them, 10% isn't going to cut it. Again, this is just from my personal experience... but my highest expense is rent, not things like food or clothing. If someone's willing to give me back the 15-20% I pay in taxes annually, I can tell you they aren't going to get that 15-20% back from me by taxing 10% on everything I've purchased over the year. I'd come out net ahead. ...