Would it not be prudent to levy tax on expenditure rather than on income as it would encourage habit of saving

Answer 1

It would be prudent.

For one thing, people would feel the tax burden on a daily basis.
Right now, with government withholding programs, the government takes part of your money in payroll taxes before you even know you got it. Then it witholds more from you paycheck. You only see a little back (without interest) if it takes too much.

Not to mention, sales taxes, city earnings taxes, property taxes, special fees, et al.

When people see their tax burden in a more tangilble way, they'll be more apt to question all the pork and corrupt social programs politicians use to buy the votes of the populace (with their own money!).

Furthermore, a sales tax/GAT tax/value-added-tax results in taxing big spenders most.

There are two types of rich people. People who spend all the money they make or inherit, and those who reinvest their money in business. The people who reinvest their money are the ones who create jobs and wealth for our country.

We should tax them AFTER they've invested their money innew jobs and factories, and go to spend it. Not before.

Answer 2

If, by expenditure, you mean transaction, then yes, indeed, it would be prudent and equitable provided that ALL transactions are taxed at an equal rate and absolutely NO exemptions are allowed. The tax rate would have to be only .1 to 1 mil on the dollar

The enormous cash flows in our Stock, Bond, and Commodities markets, if taxed at a minimal rate, could supply enough to finance the Federal Government and wipe out the National debt in as little as 1 or 2 years. This would also have a stabilizing effect on these markets.

The rich people in our Congress (which class contains all the people in Congress) will never countenance such an arrangement, though, as it requires them to pay more taxes, which in their eyes, is unfair. They therefore concoct bogus arguments like "This would increase the relative burden on the poor."

Answer 3

This is a question of balance, Taxes on expenditure are exercised in state taxes, value added taxes on goods and services sold everywhere on everything. The savings when they increase they will create a bigger hopper for money and those who take that money for reinvestment will give a very meager return due to the excess money available and due to less investment opportunities based on less spending. It is a king size dilemma and has to be treated with care. It is a cultural problem and society has to understand and handle it with great care. As for taxes on Income it is the same viscous loop and will never finish.

Answer 4

Tax on expenditure limits consuming / enjoying of what one earns though may encourage savings.The income from savings is yet to save then.We earn to invest and spend.Tax on expenditure may badly affect the middle class in the economy.Tax on income will affect only the affluents.

Answer 5

You are speaking of the "fair tax"...interesting concept...it is a way to tax drug dealers/illegals or tax dodgers...EVERYONE consumes. However, salse taxes are a regressive form of tax which inevitably hurt the poor the most. Progressive tax (like income tax) actually place more of the tax burden on the rich. BUT--it would help avoid all the tax loopholes that rich people are always able to find...but this would discourage charity giving. So, I'm kind of split on the issue.

Read more about it at www.fairtax.org

Answer 6

Yes, I am going for it and in my opinion it is a dream and the special interests will shut me down because, someone is loosing the income. But, the sale taxes is plenty and we know America is a luxury society and her people will spend and spend.So people who do not spend save on taxes.Demand and Supply.

Answer 7

Not really. Consumption taxes are regressive; they fall disproportionately on those who cannot afford to save (i.e., the working poor). Also, administration of consumtion taxes is a nightmare (just take a look at the European VAT bureaucracy)...

Answer 8

If encouraging spending would be the aim of such a tax I don't think it would accomplish that goal.

There are already sales taxes on things in some states. What that does is make the stuff cost more, leaving people with less money. For example, I know nobody likes them these days, but a package of cigarettes in NH costs sometimes under three dollars. A package in MA costs over five dollars. I've heard that in NY the cost around seven dollars. So the person who cannot quit or doesn't want to quit has far less money in the high-tax states than in the no-tax states.

If by "expenditure" you're also including everything anyone spends on, what you'd be doing would be making phone bills, heating bills, water bills, rent/mortgages, clothing, and everything else anyone spends on because they have no choice but to spend on these things use up more of someone's money and leave them with less.

I suppose you're considering that taking away any income tax (state and federal) would give people the additional money to make up for any money higher prices of everything would use up, but there is something very ominous about wanting to tax people to the point where they could potentially be driven to live in tiny homes with fewer rooms and fewer belongings; as well as having less food, less wish to spend on their children's education or other lessons, etc. etc. It could potentially have the effect of diminishing the across-the-board standard-of-living in a country.

Further, in the cases of people with modest incomes being able to get what they need would be more difficult to the point, possibly, of turning middle-income people into low-income/deprived people.

Low-income people have enough trouble now affording the basic necessities of life for themselves and their children. Making things less affordable to them could potentially have serious consequences on the standard-of-living that many low-income people at least have now.

One of the major problems in the U.S. today isn't that people don't earn a decent income most of the time. It is, instead, that things required to live a normal, decent, life cost so much.

Many people in the U.S. today can't really afford to pay as much for things as prices are these days. Since many don't want their families to be deprived of the advantages Americans have usually had they end up using credit to buy what is needed to have a normal lifestyle in the U.S. They aren't buying luxury cars and diamond rings. They're using credit to pay bills, pay for school expenses, buy clothing, pay medical bills, etc. etc. I don't pretend to have a really good understanding of all the ins and outs of economics, but I have a gut feeling that making things more expensive would not make people save but would, instead, leave them with less money. A tax structure for such a plan would probably be complicated as well.

For low- and moderate- income families even if having more money available for spending (as a result of no income tax) would seem like an improvement; since they generally can't afford the basics of living in the U.S. today anyway, all it would mean would be that they'd be spending that money in a different way.

For low- and moderate- income people savings can be a challenge, but people do it when they decide to do it. It can be hard, and it can even be impossible at times (for example, if some really low-income person saves $10 a month for ten months, and that's the best he/she can do; but then someone needs something important......already, the savings may not even be enough.

Even a tax that's just on luxury items can at times penalize the lower income person because even if they put the item on credit, know they can pay it off in three months, and will do that; what's on their credit card (and subject to interest after the first month) is the higher price they paid for the item ( and items such as televisions to replace the one that broke down are considered non-necessities).

Sales tax on more things in place of, maybe, some percentage of what is now income taxes? Maybe, I suppose. Tax on expenditures instead of any income tax? No.

Encourage a habit of saving? No. It wouldn't do it, and it is also nobody's business when it comes to who saves and who doesn't. The government is not supposed to involve itself in the personal financial habits of citizens.

Answer 9

the gov would lose mony. and the rich would get less tax brakes and we need to spend to make mony.