Oh, So Very Taxing
I don’t know why there is support for a national sales tax--estimated to be 23 percent on top of the sales tax we already pay. It seems pretty stupid to me. I’m not just referring to the fact that an eight year old who made five dollars helping a neighbor rake leaves would be taxed at the same (if not higher) rate as Bill Gates.
A $10,000 car would jump up to $12,300. A $100,000 home would jump to $123,000, with the extra $23,000 becoming part of the mortgage principle and so the new owner would be paying interest on the tax for 15 or 30 years.
On the humorous side, Red McCombs better hurry to sell the Vikings before $115,000,000 tax is added to the $500,000,000 sale price. And Sears had better close its $11 billion purchase of Kmart before the $2,000,000,000 sales tax is added.
All the sales tax increase does is make it more difficult for consumers to consume; for citizens to survive. It becomes a 23 percent inflation on buying stuff, traveling or achieving the American dream of home owning. Your cable bill and phone bill will jump 23 percent. That clunking sound in your car’s engine just jumped 23 percent to fix. The car insurance just jumped 23 percent. No thanks.
Aside from the stupidity of the deal, there are unfair aspects. Congress has been pushing bans on taxing internet commerce for years. So what does that mean now? If I buy a television on the internet and you buy an identical television in a store, does that mean you get to pay a 23 percent tax I don’t have? Good-bye stores! Good-bye jobs! This, by the way, could be construed as discrimination since poor folks and the elderly and anyone else who tends to have more difficulty with internet commerce.
Speaking of the poor, a study has shown that high income folks spend 85 percent of their income whereas low income folks spend 110 percent of their income. That means that the wealthy essentially get to deduct 15% percent of their income where as the poor not only get no deductions, they essentially have to add 10% to their taxable earnings. This is regressive taxation. This is doubly unfortunate because it was the progressive federal taxes that helped counteract the regression nature of state and local taxes (property taxes, sales taxes, parking fees, license fees, etc.).
Finally, there’d be a snowball effect on taxes. Company B buys plastic from Company A with at 23% sales tax. Company B makes widgets from said plastic. The cost of making widgets increased because of the sales tax, and that cost gets passed on the Company C, the widget distributor, which has to pay a 23 percent sales tax on the whole thing. When Company C sells widgets to Store D, the tax becomes part of the cost and there is also a 23 percent tax on the whole thing. Now, when they price the widget in the store, that tax is included in the cost. When you buy it, you pay the price and a 23 percent sales tax. In the end, you’ve paid a 94% sales tax on the original plastic in your widget. Or the companies up the line don’t pay federal taxes; shifting the entire federal tax burden onto the citizens/consumers. Perhaps that is the point.
Another possibility is that a tax shift this idiotic will make the flat tax seem pretty fair. I’ll bite, with qualifications.
Here is my proposal for Federal Taxation.
I call it the Fair Flat-ish Tax, shortened to Faatish Tax. (Not to be confused with a proposal for a Fetish Tax, which would be useful only to hear senators debate which fetishes get what taxes.)
The basic premise is the same as the flat tax: one tax rate for all income levels. Here is my version.
First off, we need to define income. I define it as all money one receives during the tax year. Seems pretty simple, but a lot of folks (read “rich folks”) wouldn’t include capital gains. Not me, I would include all of it. (I think that I lost pretty much everyone who previously considered the flat tax ingenious.) The problem comes in when you consider incomes that seem debatably unfair to tax: inheritance and selling your family home. If this plan ever is considered by Congress, by gum, I’ll have answers for you on those issues.
Second, we need to discuss tax rate. I do not know. I do not know how much income the United States receives in a year, nor do I know how much is needed the make the machine run. But, whatever the tax rate is needed, everyone pays the same tax rate.
However, we need to include deductions. There are two. One deduction for yourself. One deduction for your family. Or we could have one larger deduction for each family: whether the family consists of you, your spouse, and your 37 children or the family consists of just you. It could either be a flat dollar amount, indexed for inflation, say $30,000 per family ($15,000 per co-head-of-household) or it could be a based on the poverty level. Each person gets a deduction equal to the poverty level; maximum two deductions per household.
So, let’s say the Faatish tax rate is 25% and the deduction is $30,000. If your household makes $30,000 dollars or less, your tax owed is $0.00. (Zero.) If you make $50,000, your tax is $5000. If you make $1,000,000, your tax owed the federal government is $242,500. If you’re the Wall Street Journal editorial staff and like to call those who don’t make enough money to pay federal taxes “Lucky duckies,” I encourage you to switch salaries with said duckies. Personally, I’d take $757,500 over $30,000 any day.
So, that’s the tax plan. Pretty simple. Took less than 3 pages and most of that was poking fun the consumer tax. I know, shooting fish in a barrel.
Which is a lot cheaper when you don’t have to pay the consumer tax on the equipment!
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The opinions expressed here are solely those of the writer and do not neccessarily reflect those of the rest of the family.
© 2005, Mark Wentz