Or they could save a TON of time and money by abolishing the income tax and going to a direct, national sales tax.
(Or a 1% wealth tax on everyone... but our Billionaire Class won't stand for that.)
(Or a 1% wealth tax on everyone... but our Billionaire Class won't stand for that.)
To give you an idea, total sales in the USA was about $6 trillion, and income tax revenue was $2 trillion. So you'd need a 33% national sales tax.
How do you think someone who makes $50,000 a year and spends it all would feel about paying 33% in taxes, when today they probably pay closer to 10% today?
Or if you make housing and food tax free, you'd need an even higher tax rate to make up for it.
Most countries that do a national sales tax do it in addition to an income tax.
For some added support that your numbers are not crazy:
or you know a massive reduction in Federal Spending, the fact that US Sales was 6 trillion, and the US Government spent 4 Trillion should be ringing some alarms bells in people....
If we need a 33% national sales tax, that tells me the federal government SPENDS FAR TOOO MUCH MONEY
Percent of sales doesn't tell you much about government spending.
Just because other western nations also have irresponsible levels of spending does not justify the US spending
So, your main point is worth considering, but it's missing a vital point: the current taxation system is opaque in where funds come from. An alternative simpler taxation system is more transparent on where funds come from - I don't consider that regressive.
Let me put it crassly: if everyone paid 33% in taxes, the average voter would be more aware of the cost of tax-funded projects. Imagine what sort of voting that would lead to. I say "crassly" because in reality such a shift would definitely place a heavy burden on the poor in the near term. I honestly don't want that... but I also don't want to pull the wool over eyes.
The Fair Tax is an example: https://en.wikipedia.org/wiki/FairTax
It might still be slightly regressive, but that's not such a bad thing when overall tax burden would be reduced.
We actually frequently try lowering corporate taxes. What we find is that prices stay high, wages stay low, but profits increase. Crazy.
You appeared to be making a claim that cutting taxes on corporate profits was somehow not cutting corporate taxes.
The FairTax is just a version of a GST.
SoftTalker then noted that we tax resident aliens but do not allow them to vote, presumably seeing some similarity in terms its impact on the (implicit) social contract.
What do you see as the difference?
Yes. That is a contradiction. Categorically, it's not fair to expect someone to pay for things without letting them have some degree of decision making in how the money is spent. Otherwise it's simply robbery.
1. not taxing people who live and work here but are not citizens?
OR
2. allowing people who are not citizens to vote?
Unless we do one of these, I'm fairly sure the situation you describe as "messed up" will continue to exist.
If they are monopolies that's a problem regardless of tax policies.
Markets are rarely competitive in a true sense. There are moats/barriers to competition, there's friction for users to switch to a different product. Companies often collude to keep prices static, or use a ratcheting mechanism to increase prices permanently[1].
[1] My trash removal company instituted a fuel tax 6 months ago when diesel was at an all time high. Diesel is now $.09 cheaper per gallon. Has the trash company stopped the surcharge? I'll leave it to your imagination. Oh and there are 5 trash companies in my area. They all charge within $.50/month for their service. I'm sure that's just the result of a competitive market.
Yes in competitive markets you'd expect the pricess of commodity services to be close to the same. There isn't much differentiation other than price for something like trash removal. People will naturally choose the cheapest option. So all the services will cut their prices to the point where they will making their minimal acceptable profit.
Of course it's possible that the trash services are colluding to maintain higher prices. That's illegal, but it probably happens especially in something like trash removal where there's a history of corruption and the people involved all know or are related to each other.
2018 - 3.178 2019 - 3.056 2020 - 2.551 2021 - 3.287 2022 - 5.013
I want the various governments of the US to have control over a larger slice of GDP, not less.
Please cite one of those studies that claimed that higher income quintile and higher wealth quintiles would pay more under a "FairTax"-like system, because I've never seen one that makes that claim. Here is that specifically rebuts your claim:
https://www.jstor.org/stable/23059394
"The FairTax is promoted as being progressive, but there is considerable skepticism of this claim. We examine the distributional effects of the FairTax, as well as the current system it intends to replace, under both annual income and lifetime income approaches. Global measures of progressivity suggest that the current federal tax system is progressive while the FairTax is regressive. Our results are also robust to different assumptions used for estimation."
Sales taxes are regressive. It's the rich and upper classes that stand to gain the most by the abolition of income taxes. They don't consume enough to drive up huge sales tax bills. In terms of positive generation, mostly they accumulate income and asset gains. Overwhelmingly they don't spend their wealth on buying Ferraris and mansions. In the US the top 10% pay 71% of all income taxes (while taking home 30% of the income). Their consumption is not high enough to offset if you switch to a sales tax system. It would do something beyond brutalizing the bottom 3/4 of people; it would destitute the majority of workers in the country if you attempted it and were serious about trying to bring in enough revenue to offset the loss of the income tax.
The US has a very progressive income taxation system, far more so than most of Europe (including all of Scandinavia). The US middle class and below pay exceptionally low income taxes, the burden is overwhelmingly carried by the higher income brackets already.
We have progressive wage income taxes (much less so if you include highly-regressive FICA contributions at ~7.5% for W2 and ~15% for 1099 employees—but still) but overall the US income tax scheme is quite regressive, thanks to how capital gains taxes work, which leads to things like Warren Buffet observing that he enjoys a lower tax rate than his secretary does.
It has strongly progressive main rates for income tax, but it has extremely regressive exclusions from income taxation and from the main rates, and it has a whole separate regressive system of taxation on labor income not characterized as an income tax in its payroll taxes.
It also, viewing state and federal systems combined, has a very large portion of total taxes in other, non-income, taxes which tend to be regressive.
It seems easier to come up with that value every year and let the taxed pass the costs on to final consumers rather then chasing around a million waitresses for unreported tips.
Taxing labor was never a good idea in my opinion.
Is debt counted in? Is it a difference in wealth from one year to the next? What if someone has a reduction in wealth? What IS wealth? Is thr same asset taxed multiple times? What if someone has to liquidate something because of such taxes?
Typically, no. Assets minus liabilities.
> Is it a difference in wealth from one year to the next?
No.
> What if someone has a reduction in wealth?
They owe less the next year.
> What IS wealth?
Assets minus liabilities.
> Is thr same asset taxed multiple times?
It's taxed every year, to the person who owns it. If it changes hands mid-year, prorate.
> What if someone has to liquidate something because of such taxes?
Their asset becomes cash, they pay the tax with it, and their wealth is smaller next year. Hopefully they plan ahead better for it.
Wealth taxes exist. Entire nations manage to get this all sorted out effectively.
Namely, how do you value private assets? How much is a paining worth? Or your private company?
Houses are easy to do because there is a ton of data and comparables (and even then wealthy people contest those assessments). Now imagine the government getting into the business of valuing private companies.
> The value of private companies is determined each year by the cantonal tax authorities based on an inter-cantonal administrative guideline agreed upon by the cantonal tax departments. Taxpayers may challenge the application of this guideline in court but appeals are rarely successful (cf. an example in section 0, below). In case the fair-market value of operational companies cannot easily be assessed (e.g. because of lack of recent sales between independent third parties), their value is determined according to the formulaic method, called the practitioner's method. A company's value is determined by calculating the weighted average of its ‘earnings value’ and its net asset value (i.e. fair market value of assets minus liabilities), thereby counting the earnings value twice. The earnings value is determined by capitalising the adjusted average net profit of the last two or three years with a capitalisation rate (of currently 7%), which applies uniformly to all industries. Holding companies or real-estate companies are valued based on the net asset value of the underlying assets.
It won't be perfect, but it's predictably imperfect.
When a company is sold the value of the assets is negotiated for sometimes years. And is different for every acquirer. How is the government going to do that for everyone every year?
No, it accepts that some wealth may require estimates, eventual corrections, and occasionally court resolution. (The doc cites an example of a $2M painting hung in a kitchen being deemed non-household goods.)
The "there's an edge case, therefore it can't work" argument is hard to sustain when there are countries making it work. The Swiss handle paintings, private companies, and presumably IP (I can't find specific details in here) in their system.
And I can turn the same logic around on you: Why do you think this will work when just one country is claiming to do it successfully? Especially after other countries tried it and then repealed or at least partially repealed their wealth taxes to exclude hard to value items?