Taxes In The US?

Question

Should the US tax system be abolished along with the IRS and should we replace it with a national sales tax?

Answer 1

What makes you think that a massive (25% - 30%) national sales tax, on top of state sales taxes which are nudging 10% in some counties, would be a good idea??

It's a TERRIBLE idea, especially if you're poor. The poor spend a far greater portion of their income on essential goods and services and would be devastated by such a heavy tax levy. Consider the following example. (These are two real people in the following example, personal friends of mine. The numbers are real and so are the 2 women and the 4 children.)

A single mother with 2 kids. Deadbeat dad pays no child support. She sees a $300 or $400 income tax capture once a year. She works for a bank making $8.00 an hour for a gross income of around $16,600 a year. There are no benefits. She got lucky a few years ago while working a well-paid factory job and was able to buy a modest home. Unfortunately the job is gone but she still has her home though just barely.

With her income and the two kids, she doesn't pay any income tax. She does get the EIC, a bit over $4,000. Her total cash flow after FICA withholdings is just under $20,000 a year. By the time that tax time comes around she's 30 days behind on her mortgage. It's winter and her choice last month was to pay the heating bill and food or the mortgage. Tough choice! She gets her tax refund with the EIC payment -- the advance payment isn't enough to keep her finances flowing smoothly. The mortgage is now caught up, she puts a set of tires on her car which thankfully is holding out for now and takes the kids to the dentist for their annual checkup and several fillings each. Hers will have to wait another year. They're surviving, but only barely.

Now, let's look a the new "fair" sales tax and see what that will do to her. The EIC is gone so she just took a $4,000 pay cut. Since this tax applies to eveything and since she spends every dollar she earns on essentials she's now paying over $3,800 in Federal taxes that she never had to pay before. Her cash flow has plummeted from just under a barely survivable $20,000 to just over $12,000. In June of the first year of the "new and fairer tax" she's evicted from her home since she no longer had enough money to pay the mortgage, food, utilities, clothing, etc. She and her two kids are now shoe-horned into a tiny one-bedroom apartment on the trashy side of town.

All in the name of fairness. Fairness for whom?? Steve Forbes, Bill Gates and Warren Buffett?

The argument on taxing the so-called "underground economy" fails to consider the unintended consequence of such a high tax rate. Remember, combined it will be upwards of 40% in some locations! The problem is that tax rates that high will lead to another underground economy: Black Marketing! Look at what happens with bootleg tobacco and booze in states with high taxes on those goods. The same undesirable elements as todays underground economy will be the purveyors of black market untaxed goods and we're right back where we started.

Answer 2

If we want to shift the tax burden downward, with the wealthy paying much less tax overall, the middle class paying a lot more, and the lower income people paying more than they do now, then sure, that's just what we should do.

The major advantage I see of that plan, though, is that the underground economy, people working "under the table", would be taxed along with everyone else.

Answer 3

Well then the smart ppl would hoard their money and not buy anything or import their goods or become non-residents or something like that to avoid taxes.

Answer 4

US or national...same thing. the cash to fund the government has to come from somewhere.

Answer 5

Yeah, I think that's a great idea. It evens things out really well.

Answer 6

I think so, it would just be fairer and more reasonable.