Since the issue of taxation has been on a lot of peoples' minds lately I figured it was about time to throw my 4 cents worth in on the subject. Everyone has varying degrees of what they feel is acceptable and plenty of people showed up for the recent Tea Party protests on this very issue, among other things. My take on this is probably well outside what the norm is for most people, but I think it would provide the most benefit with the least amount of government necessary to administer it. So here we go.

First off, eliminate the IRS as we know it. Yes, abolish the entire agency and the entire existing tax code. The agency has devolved into nothing more than a terrorist organization designed to intimidate people into paying up.

As for the taxes themselves:

* No more income tax. Repeal the 16th Amendment.
* No more inheritance tax. Also referred to as the death tax.
* No more gambling or lotto winnings tax.
* No more corporate taxes. Of any type. Corporations are just intangible legal entities. You are in effect taxing the actual people more than once.
* No more medicare or social security tax. Yes, I can hear grandpa now sharpening his axe after that one.
* No more capital gains tax.
* No more property taxes.

So what should all of that (and any others I missed) be replaced with? A flat national sales tax set at no higher than 20%. Collected in the same manner as sales tax in states that have them. You go to buy something, you pay tax. Period. No more ways to cheat your way out of it, no more folks who don't make enough to actually pay taxes in the end. No more getting paid and being lied to that you're making $10/hr when you really only get to keep $6.75 after all the deductions are taken. No more having to file tax returns except by those running the businesses. The infrastructure to do this is already in place. There would be no need to have much more than a skeleton oversight office at the federal level to administer the collection of the federal taxes.

Just imagine. Not having to panic as April 15 rolls around. Because you don't have an income tax return to deal with. Imagine the savings of not having to have a huge federal bureaucracy to collect all this every year. Imagine being told you gross $50,000 and actually GETTING $50,000. Sounds great, doesn't it?

The only obstacle of course is Congress. They'll never go for this because the plan simply makes too much sense. Something like this would have to be amended to the Constitution through the process where 2/3 of the state legislatures demand Congress call a Constitutional Convention. It would then need to be ratified by ratification conventions in the states, as you'd otherwise need a miracle to get the legislatures of those states to do that. Seems to me a proposal like this would be the perfect thing for some of these 10th Amendment guys to throw out there.
"It is pointless to resist, my son." -- Darth Vader
"Resistance is futile." -- The Borg
"Mother's coming for me in the dragon ships. I don't like these itchy clothes, but I have to wear them or it frightens the fish." -- Thurindil

Well. I guess that's that then.

« Fascism in Kalifornia
Megalomaniac »

Posted on Jun 2, 2009 2:57 am by Samson in: | 18 comment(s) [Closed]
And would this national sales tax of no more than 20% replace current state sales tax? What would you do about states that currently have income tax (with all the other taxes you cited) should we get rid of those too? (Property taxes are state territory rather than Federal already, for example.) ...if it's a matter of getting rid of all taxes, state and federal, completely except for a single national flat rate sales tax, I'll agree with your idea, though I don't think certain basic necessity items (such as food) should be taxed even then and I still think 20% is pushing it a bit.. maybe we cap it at 15%? In any event, I can't begin to see the states going for the idea even if you got the feds to do so because then they'd have to rely on the Feds to split that sales tax with them.

A flat national sales tax set at no higher than 20%.

Ooh, then we can be just like Europe!

No more ways to cheat your way out of it.

What, you've never paid cash under the table for anything? Forget all the more complicated arguments - if you go to a sales tax and get rid of the IRS so that there are no audits, you're creating a huge increase in under-the-table businesses that deal in cash only.

And would this national sales tax of no more than 20% replace current state sales tax?

No. This would be strictly to replace the federal system as it exists now. States would be left to handle internal taxation as they see fit, which is more or less the point. So I guess that means they'd continue to assess property taxes, though I'd personally love to see those eliminated entirely.

Ooh, then we can be just like Europe!

No, because most of Europe has income and other taxes in addition to national sales taxes. We'd be nothing like them because we'd only have national sales tax.

Forget all the more complicated arguments - if you go to a sales tax and get rid of the IRS so that there are no audits, you're creating a huge increase in under-the-table businesses that deal in cash only.

I said get rid of the IRS as we know it. Chances are there would need to be some kind of skeleton crew left over for audit purposes. However your argument that it would create a mass increase in black market sales is ludicrous because the potential for that is already there now in states that have sales taxes. The only reason income tax works is because the feds force your employer to make the deductions or THEY go to jail too, not just you for evasion.

No. This would be strictly to replace the federal system as it exists now. States would be left to handle internal taxation as they see fit, which is more or less the point. So I guess that means they'd continue to assess property taxes, though I'd personally love to see those eliminated entirely.

Ouch, so in states that already have higher sales tax one could find themselves having to pay nearly a third extra on every purchase and still having to pay income tax, death tax, property tax, etc (all the rest of the taxes you mentioned as well) to their state. Sounds fairly expensive, especially to those on welfare and/or social security (including retired & disabled people). But I suppose that, for those who are currently taxed crazily due to income and such, it'd be a fairly big tax break, afterall, currently the Feds take something like 35% of your paycheck, and you're proposing them only take 20%.

Schwarzenegger is a crafty bastard, he's trying to trick people into accepting a flat INCOME tax here in California. Trotting it out as tax reform. The only problem is, like one of the commenters on the site said, our top income rate right now is 9.3% so he's not advocating a tax cut of any variety at all. He is in fact proposing an almost 100% increase in tax rates, for everyone, rich or poor. It's exactly the wrong way to fix the problem.

Doubling peoples' income taxes is only going to encourage them to run for nearby states that either don't have income taxes, or have income tax rates much lower than ours. Oregon or Nevada for example. Perhaps even Arizona, assuming the desert life appeals to you. Arnold needs to shelve the entire income tax system here, just like we need to do at the state level, and switch us over to nothing but a state sales tax. And that includes the punitive property taxes as well - drop those. We're lucky to have Prop 13, but even so, taxing property is heinous.

Nice article, the comments appear to be far more informative than the actual post though.

So the current state tax there is 9.3% (10.3% if you're making over $1M/year) and The Govenator wants to propose a tax cut/reform to lower it to 15% ...and you can bet he's not talking about eliminating any other taxes like property tax, corporate taxes, estate tax, franchise tax, sales tax, etc. ...What a guy! *rolling his eyes* My father used to be fond of the expression, for cases like this, of "with a friend like that, who needs enemies!"

I did like the suggestion one commenter made that he should just tax pot instead. :D

Wow. I actually agree with Samson on something. Neat!

Don't get me started on marijuana laws and taxation. That's a no-winner battle no matter what happens. Though, for the record, I'm pro-pot (but I don't use it and likely wouldn't even if it were legal).

*chuckle* I've had my share of those sentiments too, Whir, though not with Samson who I actually tend to agree with frequently but with certain other people who post frequently at the places I frequent. ;)

I won't be the one to get you started about it but I do disagree that it's a no-win situation and will also state, for the record, that I'm pro-pot even though I don't use it and probably wouldn't even if it were made legal, though I have used it in the past (when I was still in high school) and feel that the experience was without significant detriment.

Couldn't care less if people want to smoke pot, much like I don't care if they smoke cigarettes. Just don't use that shit when you're sharing breathing space with me or I'm going to let you know about it.

As for taxing it, if it gets made legal then tax it the same as alcohol or tobacco. Excise tax. Of course, if someone wakes up and uses their brain and implements my tax plan, that won't be necessary as it would be covered under the sales tax :)

Put me on the bandwagon for never-used-it-never-care-to-legalize-it-anyway with respect to pot. For that matter, the whole War on Drugs needs revamping, although I tend to wonder if it'll ever really happen, the politics being what they are.

As a matter of brief disagreement because I don't much care to argue the point, I'm not much of a fan of sales taxes in any case, and I don't have much of an issue with most of the other taxes I'm supposed to pay.

That said, your numbers are completely whack. Some brief back of the envelope calculations here, using some old tax returns from when I had a real job and was paying them like a normal person.

Income: $13,559 (which would have been about $21,000 had I been employed full year, so pretty solidly working class here)
Taxes: $735 federal, $690 OR state, $26 CT state, $888 for Social Security/Medicare. Grand total is $2,339 for the year under the current system.

As of right now as a CT resident, I have about $1,000 in expenses per month and I'm pretty sure a 6% state sales tax. Likely it would go up if all other taxes got eliminated, because God knows CT needs the money, but:

$1,000 * 26% taxes = $260/month * 12 = $3,120 per year in taxes. Which is what, $800 more that I'm paying? For $800, I'll take April 15th, thanks.

About all you've done with your numbers is proven that my numbers wouldn't burden 99% of people in your income bracket enough to matter. You're still paying, and paying what I'd argue is a more fair share since you aren't able to evade doing so any more. And I've been in situations where I've made less than that in a year's time while working so I'm fully aware I'd be asking myself to put out more money per year. But it's also unlikely to get noticed over that length of time.

I also made it pretty clear 20% would be the top end. A lot of people I've seen argue this say we'd do just fine on 15% national sales taxes while eliminating all of the other federal deductions combined and still be raking in money hand over fist. If we ended up with deficits under such a system it would be ironclad proof that government spending is out of control and blind as a bat.

How much would national sales tax have to be to fun universities and national health care? Figure that out and I'm sold.

It would have to be 70-80%. Ask the Canadians, they know.

Neither one of those is a Constitutionally specified power of the federal government anyway. So the real answer to your question is undefined. You just caused a divide by zero error, way to go!

Oddly enough, my experiences making that much with people who make about that much suggest that $800 is in fact a really big deal. It would actually be significantly worse for a lot of people - most places around here I'd be paying about double in both expenses and tax if I wasn't living in a single room like a monk. Keeps getting significantly worse when you start adding kids and possibly a spouse.

As it happens, to get to a level that equals what I actually paid, you'd need to drop to 13% national. It actually gets even worse if you start abolishing state income taxes too. Expect CT sales tax to start equaling the federal one, and suddenly I start wondering why the hell I'm paying 25-40% more for everything.

Too, a national sales tax doesn't actually fix any issues with state and local taxes, which is what most, say, property taxes are last I checked. You'd need to come up with some other solution to those, and I'm not really sure more sales tax is the way. National sales tax for local stuff definitely isn't the way.

Too, to bring back Sarah's point, expect a lot more cash-only transactions. You already see a fair bit of that in CT, where lots of places either charge less for cash or only take cash. I expect going this route eventually leads to something like rationing did in World War II - a fairly large extralegal black/grey market.

Just not sure how I'm supposed to be winning, here. The hour or so it takes to do my taxes isn't really $800 of my time, and I guess I just don't see the IRS as the evil agent of government oppression anyway.

Well the other effect of setting up a national sales tax is that it would make the payment of taxes far more in your face to a lot of people who don't currently pay any at all, and I can't really see how you making $13K would have any liability at all under our current system. Maybe if the general public actually had to PAY for the things they expect the government to provide now it would cause people to rethink the entire welfare state system we've built over the last 60 years.

So if the thought of paying an extra 25-40% for everything abhores you, it sounds like it's time for you to rise up and start making some noise about how much you're paying in taxes, because you're already losing that much and more from your actual pay now.

The real problem with switching to a national sales tax instead of state & federal income taxes (etc.), is that those who are currently barely making enough to cover their bills and still feed their familes would suddenly find that they no longer had to pay taxes that they were mostly already not contributing to but instead would have to either starve themselves and their families or resort to crime, which is why I suggested earlier that this national sales tax should include an arbitrary exemption for necessities such as food. Here in Texas, there is no income tax, but the sales tax is over 8% and we've still got property taxes and quite a few other taxes too, all before federal taxes. I know people who work for an honest wage and still have to spend more time clipping coupons than working in order to make ends meet. Would a national sales tax be better for them than having a quarter to a third of their paycheck withheld? It's hard to say, but mostly it would depend on whether they could afford basic necessities after the transition, if they didn't have to pay any sales tax on groceries, they might still make it. Frankly, for folks like them and myself, just doing away with gasoline taxes completely would be almost enough all by itself. Legalizing marijuana and taxing it instead would generate plenty of additional income for the government without impacting those of us who couldn't afford marijuana even if we did want it.

I guess I sort of thought it would be obvious enough to not need saying that food would not be taxed. Food is already exempt from state and local sales taxes here in California and I guess I assumed the same is true everywhere else. You're making it sound like this is not the case, which I'd have to wonder why.

And to clarify further, unprepared food. If you make your meals by visiting KFC 5 times a week, you still have to pay tax on it. Stuff you buy at the store than you later have to cook at home is exempt. I'm not sure what else is, if anything, but food for sure. The poor certainly haven't been complaining about it here, and crime is going to happen regardless.

Fair enough, I know that food is exempted from sales tax here in Texas, and in New Mexic as well, but even groceries are not tax exempt in Virginia. (The three places I've lived recently.) Basically I was just clarifying/verifying that it'd be under your proposed national sales tax plan too.

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