would it work if we had no income tax but a 33% sales tax and the poor only 10%?

Answer 1

so every time we buy something, we'd have to show the cashier a pay stub? Or carry a "I'm poor" card. I guess it would be motivation to get ahead. One thing to remember is that our economy is based on goods and services. I'd be pretty hesitent to go buy a new car for example if I had to cough up an extra $8500 or more to pay the taxes. I might hire my broke dick nephew to buy it for me.

Answer 2

Income and sales taxes accomplish two different things. Income tax (federal) goes to support public services at the federal level, for example the post office or to pay your Senator's salary. State income tax (if you have any - some states don't) pays state public services, for example schools, Governor's salary or highway patrol. Property tax pays for local public services such as streets, stop signs, City Councilmember's salaries, etc... Sales tax varies from state to state and even from city to city, but generally goes into what's known as the general fund. This is also used for state and local projects, programs and services.

It is unlikely, nor is it advantageous to eliminate federal income tax. This would shift the taxation burden entirely on sales of goods and services and it would have to be extremely high, slowing economic growth, likely plunging the nation into a massive recession. It would also place the burden of distributing these funds on the local municipalites.

As an alternative, some years ago Steve Forbes proposed a flat 10 or 15% tax. That is everyone would pay an equal amount and all loopholes would be eliminated. The advantage of this is the elimination of tax returns and complicated tax codes, reducing infrastructure and saving money. The other advantage is it would close loopholes for wealthy Americans who can afford tax shelters like summer homes, etc...

The current tax system is graduated, that is the more you make, the more you pay - in theory. However in reality because of the numerous write-offs available, many people with homes or home-based businesses, many children can pay a lot less than say an average, single, lower income person, working at a factory and renting an apartment. This tends to prevent upwards mobility and is seen as unfair by many.

For the very poor right now, the tax rate is zero. If you make very little money, you will drop off the tax schedule and pay no tax. In addition, many states do not charge sales tax for food items, again assisting the poor with the basic needs of life.

Answer 3

The cost of changing compliance would be staggering. Sure, some of these ideas sound potentially nice in theory but no one likes to think them through the implementation.

Put it this way, there is enough of a skirmish each time a tax law is changed for software vendors. Everyone relies on these vendors, payroll, decade old cash registers, IRS, etc. It would ALL need to change.

Plus, at the heart of the theory, what would REALLY change? Right now, someone with very low taxable income DOES NOT pay that much in taxes. Actually, for a married couple you'd have to make more than $27,000 to even get out of the 10% income tax bracket (before the standard and dependency exemptions).

Sure, the effect of a tax deduction to someone with millions in taxable income is greater (35%), but they STILL PAY MORE as a percentage in tax.

Answer 4

The people of this country had a chance about 20 years ago to vote on a straight across the board 10% income tax and they voted it down. People thought they would be better off using their loop holes and deductions but they were wrong. The middle class has been paying more in taxes than anyone else for years. So your idea would be the same as we have now .

Answer 5

Nope, not in the least. How would you differenciate? Everyone would show up at the checkout counter and claim to be poor.

You'd need more screening processes, and have to regulate everyone .... those below the poverty line needing to carry some sort of verification that they were low income to get the discounted sales tax.

Would never work.

Answer 6

Some combination of would work, not sure if your specific percentages are reasonable. Read a book on the subject by a radio talk show host in Atlanta by the name of Neal Boortz. He has a great idea on this subject.

Answer 7

Every single civilization and nation that has ever died a natural death, died with a high tax rate, and no one with enough money left to cover it.

My preference: Just send me a damn invoice for services rendered, and I'll subscribe for the specific services I wish to receive. That's true economic democracy in action....