re: Would you be in favor of eliminating the federal income tax & replacing it with sales tax?

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I think a lot of this is misleading. It’s exactly what the 1% want you to believe so they can keep using the complex tax code to manipulate their income taxes and pay very little in taxes relative to their income.

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horseshite; I don't disagree that there’s manipulation of the tax code. That’s a problem. Let’s also not forget that the people pushing the national sales tax and flat tax are often the uber rich. They know it favors them big time.

The flat tax and national sales tax penalize the average working person. The family who lives paycheck to paycheck and spends 100% of their money just to get by are effectively paying a 100% tax rate. They can’t save; they are literally just getting by.

Meanwhile; the Bezos’s of the world are accumulating millions of dollars per day. I think this part gets lost in the tax conversation. We’re not talking about millionaires. We’re talking about billionaires. They collect so much that they can’t even remotely spend it at the same rate they collect it. So ol’ Jeff pays only a fraction or even a few percent of his income in taxes. Moreover; ol’ Jeff knows that he can avoid the taxes altogether by buying his yacht and registering it overseas. Something poor Junior and Lulu can’t do because they just spent their last few dollars buying ramen noodles.

Listen, I’m all for making the tax system fair. Fair means everyone pays and those making more take on a somewhat higher burden. Let’s also not forget that a huge percentage of the rich are generationally wealthy. Meaning they didn’t earn it. They inherited it. So they are skating on the income tax portion already in many cases.

The answer isn’t a new tax code. It’s enforcing the existing one and closing the loopholes that allow people to cheat the system.

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The flat tax and national sales tax penalize the average working person. The family who lives paycheck to paycheck and spends 100% of their money just to get by are effectively paying a 100% tax rate. They can’t save; they are literally just getting by.

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This logic makes no sense at all. You’re not paying a 100% tax rate. You take all of your income home 100% and have none of it withheld from your paycheck. Meanwhile, you pay no taxes on the groceries and medications that you buy. You only pay taxes on luxuries that you buy.

What about that sounds bad for a low income or working class family?

Two things which will never cease to exist:

Entitlement programs such as welfare and medicaid
The IRS

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No. Aside from being regressive, sales tax is a huge weight on small businesses.

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1) Reduced tax progressivity is not "regressive."

2) A tax is only a weight on business (aka sales) if it makes goods less affordable. Swapping income tax with a sales tax would not do that.

How it is taxed is not nearly important as how much. 15% sales vs. current income tax, for arguments sake, is a good thing. Once some sh!thead like BerniseSanders decides it needs to be 30%, a good idea can become a terrible one.

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A tax is only a weight on business (aka sales) if it makes goods less affordable. Swapping income tax with a sales tax would not do that.

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How much margin do you think the average business has that they can lower their prices for 20% or more to account for a federal government funding sales tax? Household costs would skyrocket with a VAT. What happens to grocery stores that already operate on crazy thin margins that are propped up by higher margins on items that surely wouldn't fall into so many people's "necessities" carve outs. What happens when nearly all of grocery store sales come from exempt necessities that have practically no margin in them and no one buys the items that actually keep the store alive?

Will non-essential medical treatment be subject to this sales tax? If not, why not? What about other professional services?



BTW swapping income tax into a sales tax would royally frick retirees.

And again, this doesn't even begin to address how crushing this would be to start up businesses who cannot carry forward losses and recoup costs before the government takes a gigantic cut of their potential revenue.

Discussions around HOW you're taxed is just rearranging the deck chairs on the Titanic. The more important discussion is the discussion around expenditures. If the government can't reduce/limit spending, they'll still have to come up with funding/taxes. Without reducing spending, total tax burden will remain the same. It'll be just shifted to other methods (i.e. sales tax, property tax, etc.)

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Simply put, if take home pay and prices both increase 20%, how does that impact affordability?

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Simply put, your scenario proves the point you’re arguing against. A pretty small percentage of taxpayers have a 20% or greater effective federal income tax rate.

A national sales tax at a rate that replaces income taxes would hammer lower income households.

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Would it? Is that the way the VAT works across Europe?

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I thought the whole point of replacing income taxes with a sales tax would be to make low income people with no federal income tax burden have skin in the game?

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This all sounds great in our glass house theory but what do you think happens when the burden on the poorest people gets 20-30% worse? Or the people on that line of poverty?

Thats the issue you have to try and avoid with a national sales tax. Otherwise you just make a ton of people much more poor overnight and create a whole other issue.

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I have the feeling you're not taking into account how much of price is due to the federal income tax and not taking into account how much people would be getting back on their checks by not having to pay federal income taxes. Before you can make a statement on whether a burden would even exist (much less its extent), both of these need some sort of answer.

Without going deep into the weeds on every specific income tax rate, categories and what percentages of federal revenue they account for, we can just generalize on average business and personal tax rates to get at least a rough idea of what such a scenario may look like.

Again, these are all going to be very generalized but it should be enough to give you at least an idea of what this means. I'm going to use the actual national averages of the average corporate income tax rate at 21% and the average personal income tax rate at 15% with a national sales tax of 20% (for easy math). Business taxes are always passed onto the consumer through the price of the good/service; thus we can say (again, in a very general sense) that 21% of all prices are due to the federal income tax.

Thus, if the income taxes were replaced with an 20% national sales tax, then what we are looking at is consumers getting a 15% increase in their income while prices drop 1%. Even if we push the sales tax to 25%, while that comes out to an average price increase of 4% which is still more than offset by consumers getting an average 15% extra in their paychecks.

Since you specifically mentioned the poor, let's dig a little into the weeds to look at how this would impact the specific personal income tax rate categories:

Anyone making $11,000 or less pays $0 in income taxes.
From $44,726 - $95,375 is 22%.
From $95,376 - $182,100 is 24%.
From $182,101 - $231,250 is 32%.
From $231,251 - $578,125 is 35%.
And then $578,126+ is 37%.

So, sticking with the 20% sales tax and national average income taxes, anyone making $11k or less sees prices drop around 1%. For the higher income levels they not only see the prices drop slightly, but they also receive the huge bonus of not having income tax (which would be, essentially, their getting pay raises ranging from 22%-37%).

Again, this is all very generalized and specific goods and services would likely see either more or less benefit from such a switch, but this should give you an idea of how it wouldn't be nearly so abusive of the poorest (if at all).