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Bush floats a national sales tax
Old 08-12-2004, 01:38 PM   #1
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Bush floats a national sales tax

National Sales tax and no IRS? Most likely we would end up with both taxes. When European countries added VAT they still had income taxes. I don't think a national sales tax will come to pass; it is to regressive.
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Scrap the tax code? Bush floats a national sales tax

On campaign trail, president appears open to a major shift, which Kerry promptly pans.

By Linda Feldmann | Staff writer of The Christian Science Monitor

WASHINGTON – George W. Bush is known for liking bold, sometimes even risky, initiatives - ideas like sending a man to Mars, or revamping the US immigration system, or overthrowing the dictator of Iraq.

But is the president really ready to take on the American tax system? A comment Tuesday at a town-hall meeting in Florida has reignited the long-simmering debate in conservative circles over whether Washington should rethink the way it levies taxes.

When a supporter asked President Bush about scrapping the current tax code and replacing it with a national sales tax, he replied favorably: "I'm not exactly sure how big the national sales tax is going to have to be, but it's the kind of interesting idea that we ought to explore seriously."

Since then, White House spokesmen have not ruled out the idea. Nor have they ruled out that Bush may announce a big new initiative on the tax system at the Republican convention. Some of the president's economic advisers are known to support reforms to simplify tax collection and promote savings and investment.

Rep. Bill Thomas (R) of California, chairman of the House Ways and Means Committee, also favors looking at alternatives and told reporters that his committee will do so. And in a new book, House Speaker Dennis Hastert (R) of Illinois calls for replacing the current system with either a national sales tax, a value-added tax, or a flat income tax.

Democratic presidential nominee John Kerry jumped on what he called the Bush "proposal," saying it would harm the middle class. "Were the Bush proposal to be adopted, many Americans would be paying more than 20 percent in national sales taxes" on top of state taxes, he said.

Not all conservatives like the idea of instituting a national sales tax. Bruce Bartlett, a former Treasury Department official under the first President Bush, writes this week in National Review online that even a 23 percent national sales tax, as proposed by Rep. John Linder (R) of Georgia four years ago, vastly undercalculates the rate that would be needed to replace all federal revenue.

For now, the question is whether Bush really wants to inject this bold new idea into an already issue-laden campaign. "They have other things they want to talk about," Mr. Hastert told the Associated Press recently. But Bush is known for his on-message discipline - and so perhaps his quick comment wasn't a gaffe at all.

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Re:  Bush floats a national sales tax
Old 08-12-2004, 05:58 PM   #2
 
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Re:  Bush floats a national sales tax

Great, so I paid a boatload of taxes while I worked hard to earn as much as I could to retire early, and now they are thinking about getting rid of the income tax and creating a spending tax so I get hit hard again when I spend it. How is that a good deal for ER people?
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Re:  Bush floats a national sales tax
Old 08-12-2004, 06:03 PM   #3
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Re:  Bush floats a national sales tax

I suppose it depends on how much you spend and how you spend it.

I'd need to see how it was structured first. If it means I dont have to worry about capital gains and dividend interest in exchange for paying a 10% VAT on top of the state sales tax, that would be a good deal.

If its a 20-25% VAT then it would suck.

But it wont ever happen because it'd be too simple and would eliminate a huge government entity.
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Re: *Bush floats a national sales tax
Old 08-12-2004, 08:24 PM   #4
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Re: *Bush floats a national sales tax

It would be great for most of us "non consumers". Meaning that most folks here aren't into consumption anymore. That said, I doubt it would ever pass (too good to be true) because it would take away the politicians ability to use class warfare to get our votes.

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Re: *Bush floats a national sales tax
Old 08-13-2004, 05:04 AM   #5
 
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Re: *Bush floats a national sales tax

Quote:
It would be great for most of us "non consumers". Meaning that most folks here aren't into consumption anymore. That said, I doubt it would ever pass (too good to be true) because it would take away the politicians ability to use class warfare to get our votes.

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How wrong you are. A sales tax would be the most regressive tax of all and would fuel Class Warfare. Of course, I suppose CEO pay of 500 times workers pay does not invoke class warfare either.
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Re:  Bush floats a national sales tax
Old 08-13-2004, 05:29 AM   #6
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Re:  Bush floats a national sales tax

I think this proposal would do is make the level of taxation more visible. Every time you buy a product, there are loads of taxes that have been added to that product at all stages of production. It is estimated that 25 to 30 percent of a products final price is taxes that have been levied at some point.

Once taxes become more visible, you can make a conscious decision to pay or not pay them.

I think what this is attempting to do is make the economy in the long run more efficient. A more efficient economy will grow faster and generate more revenue. Not only does it reduce or eliminate the IRS, it would put most tax preparation professionals out of business. In the long run, resources would be relocated to more productive and efficient uses within the economy (now I am starting to sound like an economics professor I used to have).

I am all for making the amount of taxes we pay more visible - maybe once people realize that the government probably takes 50% or more of their income to taxes(through federal, state, income, Social Security, Sales Taxes, Property taxes, gas taxes, Taxes imbedded in products, fees, surcharges) they will begin to demand smaller, more efficient governments.

I heard one pol say that this was not a good idea since it would hurt the job market - you would be putting 300,000 people out of work!!!!! !!! Get out you calculator and say for the sake of argument that the average IRS receives a salary of 30,000 and their benefits are an additional 15,000. Multiple $45,000 times 300,000 and you get 13.5 billion dollars - and that is just for labor. Add much more for facilities and overhead and computer systems and you are starting to talk about real money!!

Remember, regardless of what the government says to the contrary, you can allocate your resources more efficiently and meet your needs better than a government bureaucracy. (I guess my libertarian leanings are coming out in this post! 8))



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Re:  Bush floats a national sales tax
Old 08-13-2004, 05:44 AM   #7
 
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Re:  Bush floats a national sales tax

Quote:
I am all for making the amount of taxes we pay more visible - maybe once people realize that the government probably takes 50% or more of their income to taxes(through federal, state, income, Social Security, Sales Taxes, Property taxes, gas taxes, Taxes imbedded in products, fees, surcharges) they will begin to demand smaller, more efficient governments.
Bruce,

Since Social Security, Medicare and Defense make up the brunt of the Federal Budget. Where do you make the cut?

Hey, I've got an idea. If we would not have went to War in Iraq we could have saved over $150 Billion!
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Re:  Bush floats a national sales tax
Old 08-13-2004, 05:49 AM   #8
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Re:  Bush floats a national sales tax

If this actually goes anywhere, it might follow the repeatedly-instroduced legislation described by http://fairtax.org.

IIRC, the solution to the regressive taxation problem was to exempt everyone from sales taxes for that amount of spending that represented the typical cost of living. How to exempt people from a sales tax? Just give them that much money on a monthly basis, so they have been reimbursed in advance for that spending. Thus, people at or below the "standard" level pay nothing in the sales tax, even if none of the next paragraph comes to pass...

The research they report suggests that 25-30% of typical prices represent the cost of taxes brfore the product gets to the shelf, and these costs would go away. Presumably, market forces would then push prices down accordingly.

Their research aslo indicated that a ~17% tax at the final retail sale would fund the government as it currently operates, including keeping the entitlements funded. So the net cost of goods at the cash register should decrease by 8-13%.

It is interesting to think about businesses small and large conducting their business without having to even think about the tax implications. That will probably cut their accounting overhead dramatically.

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Re:  Bush floats a national sales tax
Old 08-13-2004, 06:40 AM   #9
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Re:  Bush floats a national sales tax

The problem with all this.... Is..... In countries that already have a Government/National Sales Tax, I.E UK (17%) and Canada (8% + Respective Provincial Sales Taxes).... here is what I noticed. I was in both areas when the taxes were applied, and listened to the promises that things would be cheaper in the stores and business would operate more efficiantly. Well guess what? No Surprises here. The shelf prices never changed in either countries, in fact they all went up to reflect the newly applied tax. I am sure Europe and Australia are/were the same. I have no experience in those countries. A Pint of beer in the UK is now about 2 - 3 pounds and a bottle of Scotch is astronomical. Both are made there. In Canada a bottle of booze is 1/3rd more than the US. Gasoline is astronomical in Europe and somewhat higher in Canada than the US. Fridges and Appliances are higher in both Countries than the US and Cars vary, mostly they are higher at the end of the transaction. Electronics is higher in both areas. So I personally Pooh Pooh the reteric of cheaper prices at the the shelves. Oh, and Income taxes in both these areas are higher than the USA. So no kidding ourselves here.

My personal preference is to have the SALES/VAT/GST taxes concealed/included in the price of an item at the retail level. So what you see is what you pay. A car does not cost a whopping $3000 more after you make the decision! Or a New House (In Canada) doesn't cost you an absurd $20,000 more on a $250,000 home decision. You can then make a decision on the overall prices of items at the retail levels. Why care about how much tax you actually pay, once the base numbers have been set? You have to pay them anyway. I personally hated digging in my pockets to find change to pay a 7 and 3/4% sales tax on an item that was priced at $15 on the shelf. That was in California, when I lived there. Perhaps the receipts could reflect the taxes for those who really care, but for the average punter like myself, all I am really concerned about is the bottom line..... and having enough cash in my pocket, or money in the bank to pay for it.

THUMP! (Me falling off my Soap Box)

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Re:  Bush floats a national sales tax
Old 08-13-2004, 07:40 AM   #10
 
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Re:  Bush floats a national sales tax

Hello SWR, and "my personal preference" is for all
politicians to fall on their swords (except for the
"girlie men". They can slash their wrists with their
hand mirrors). Seriously, whenever they start to fiddle around with your taxes (any taxes), it's a safe bet we
(the people) will get burned. Remember John Galt's
37th Law of nature:

There are liers, damn liers, and politicians. (Doesn't matter what country)

End of rant.

John Galt
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Re:  Bush floats a national sales tax
Old 08-13-2004, 08:43 AM   #11
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Re:  Bush floats a national sales tax

If you wanted to make taxes much more progressive, throw out all taxes and replace with a wealth tax. The more money you have, the more you benefit from our economic system - so the more you should pay. :

Or tax all financial transactions - there is so much money being transfered all the time you could probably raise as much money with .25% tax on all financial transactions.

But it will never happen - too many groups would lose out.
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Re:  Bush floats a national sales tax
Old 08-13-2004, 08:48 AM   #12
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Re:  Bush floats a national sales tax

Just remember, any changes to make the tax rates lower carries a tremendous benefit. Many people would argue that lowering of the marginal tax rates in the early 80's sparked the economic boom of the 80's and 90's. In the 70's, some of the marginal rates on high income earners approached 90%.
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Re:  Bush floats a national sales tax
Old 08-13-2004, 09:20 AM   #13
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Re:  Bush floats a national sales tax

It will never happen. They need the taxes from the Bloated IRS Department's workers. What would they all do? Get Laid off, stop paying taxes... The IRS in itself is such a cash cow for the Government. They can't exactly cheat on their taxes can they?



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Re:  Bush floats a national sales tax
Old 08-13-2004, 09:45 AM   #14
 
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Re:  Bush floats a national sales tax

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I suppose CEO pay of 500 times workers pay does not invoke class warfare either.
Heh, heh. That IS the class warfare

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Just remember, any changes to make the tax rates lower carries a tremendous benefit. Many people would argue that lowering of the marginal tax rates in the early 80's sparked the economic boom of the 80's and 90's. In the 70's, some of the marginal rates on high income earners approached 90
Wrong. In the 70's the economy grew immensly. Reagan was standing there when a business cycle happened to him. It was the same cycle that also made Clintstone look like an economic genius.

When you lower taxes the business class just sends it to bottom line and keeps it. There is no incentive there to lower prices


Quote:
It will never happen. They need the taxes from the Bloated IRS Department's workers. What would they all do? Get Laid off, stop paying taxes... The IRS in itself is such a cash cow for the Government. They can't exactly cheat on their taxes can they?
Unfortunatey this is true. Long ago it w as known that capitalism and the private sector business class had no intention nor the a bility to provide all the jobs needed and certainly no intention of paying people enough. SO, the gov got structually bigger to soak up the excess. They can also use this sutualtion to keep just enough people unemployed to make joining the military look like an acceptable c areer option. without an econimically exploitable class the Rich would have no one to creat their wealth, or support protect or defend it
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Re:  Bush floats a national sales tax
Old 08-13-2004, 05:49 PM   #15
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Re:  Bush floats a national sales tax

If I were king, I'd have a three-legged stool of taxation... a flat income tax, a small national sales tax, and a small asset tax. Each tax would be small enough to make it not really worth trying to work around, and and simple enough to make it hard to hide cheating. Each tax has its victims and its beneficiaries, so the relative rates of each would still allow for the social engineering that the politicians desire. If I were king.
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Re: *Bush floats a national sales tax
Old 08-13-2004, 06:51 PM   #16
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Re: *Bush floats a national sales tax

I have always found it surprising that amongst all the World's major economies, the US is one of the few without a wide ranging sales tax (VAT/GST). In addition, the US pays amongst the lowest fuel taxes and alcohol and tobacco taxes, so it is perhaps no surprise that with mounting deficits and national debt that this item should come back onto the political agenda.

In the UK for example, it is easier to list the items which are NOT subject to VAT (Value Added Tax) - basically only books and newspapers, children's clothes/essentials and education costs are exempt. Everything else has 17% VAT. even domestic fuel (gas and electricity) is taxed at a rate of 5%. Then there are the mega-comsumption taxes on vehicle fuels, alcohol and tobacco. The rest of Europe, Australia and Canada are much the same, certain domestic variations aside. The main issue with these taxes is that once introduced, they represent the easiest way to squeeze extra cash in times of need. After Budget day, most UK newspaper headlines run with ''10 pence on Petrol: 2 p on a Pint" or whatever the numbers are that year, with changes to the details of income taxes, allowances etc being secondary. Once the psychological barrier of a sales tax is broken and one becomes accustomed to it, it becomes an insidious ''stealth tax'' in it's reach and scale - e.g. the introduction of ''Insurance Tax" - a flat tax paid on all insurance policies, was an early spawn of VAT, then came a travel tax - a flat charge for leaving the UK by air. There are many others, but perhaps their greatest achievement was the ''Tax on Tax'' where VAT at 17% is charged on the price of a new car which already includes a 10% vehicle duty tax!

That said, of course Europe does generally have a wider provision of social services and welfare.

In the end, you get what you pay for, high taxes = more Government services, low taxes = low Government services. The downside is that universally, Governments are usually the worst, least efficient providers of most services and they remove the individual's element of choice. One ends up paying large taxes for a very poor services (the UK being one of the best examples of such).

Sales taxes are regressive and in my opinion should be resisted as far as possible.

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Re:  Bush floats a national sales tax
Old 08-14-2004, 01:30 PM   #17
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Re:  Bush floats a national sales tax

Amateur analysis:

Was thinking about taxes "built-in" to current products and how in theory it's the same if they are instead taxed at sale.

I came up with a couple of thoughts: Manufacturing- and distributing-based taxes are currently already paid when a product hits a retail shelf. But not all products are sold. They expire, have no demand, etc.., so they are either thrown away (groceries, cover-ripped books) or sold as distressed merchandice on clearance tables or to resellers (Half Price books, for example, half.com, etc..)

If all taxes were sales taxes the tax on normal items would have to be higher to compensate for the distressed and destroyed merchandise.

I suppose it could be argued that business currently has the price of waste built in, so it all evens out, but I'm way over my head now.

I find it odd that I keep agreeing with a man who describes Rush Limbaugh as (relatively) liberal, but I have to side with John Galt here in that if they want to change it it's most definitely not for our benefit.

A-ha! Like Saver to Spender alluded to, This is just a way of double-taxing all that 401(k) mutual fund money that has built up over the past 20-30 years.
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Re:  Bush floats a national sales tax
Old 08-14-2004, 05:02 PM   #18
 
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Re:  Bush floats a national sales tax

Hey BMJ, it's nice to be quoted accurately
(re. Limbaugh, etc.). Even my devoted spouse
gets it wrong at times

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Re: *Bush floats a national sales tax
Old 08-14-2004, 10:01 PM   #19
 
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Re: *Bush floats a national sales tax

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It would be great for most of us "non consumers". Meaning that most folks here aren't into consumption anymore. That said, I doubt it would ever pass (too good to be true) because it would take away the politicians ability to use class warfare to get our votes.
I beg to differ with the first part. I may spend just as much in retirement, if not more, than now while I am still in the accumulation phase.

But that aside, I too think this will never pass because the politicians will lose a lot of power. It may only succeed if it is phased in over a long period, like 10 years. IN THEORY, we would start with a 1% national sales tax while keeping the current tax system. Then each year we would go up on the sales tax rate while decreasing the income tax until we get to a 1% income tax the year before the income tax is completely eliminated. Of course, no politician would be diciplined enough to make this work correctly, so we would probably end up with both as permanant tax systems and just get overtaxed. So, I would vote NO on a national sales tax.
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Re: *Bush floats a national sales tax
Old 08-15-2004, 09:59 AM   #20
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Re: *Bush floats a national sales tax

Hi Spender,
"I beg to differ with the first part. I may spend just as much in retirement, if not more, than now while I am still in the accumulation phase. "

This has not been my findings. Generally, peoples habits are the same. So if your frugal now, that will most likely continue. But there's always the exception.

Good luck, and Follow your Dreams,
Billy
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