A national sales tax is about the worst way to equitably tax the people of this country or any country, state, or political division.
Look at what people would buy, and how they would pay sales tax:
- Food -- For people with low incomes, food can be twenty-five percent (25%) of spending; those with high incomes think nothing of spending hundreds of dollars on food, food preparation, food preparers ... and it is surely well under ten percent (10%) of their total income. Hmmmm.... starting to see the unfairness yet?
- How about housing ... if we are to have an equitable tax, shouldn't housing also be taxed? Other than the fact I have no idea how they would manage that, it is still a matter of those with low income spending a far higher percentage of total income on housing than do the well off.
- It is true that the wealthy spend much more on things like cars, airplanes, clothing, shoes, furniture, household items of every nature ... but what percentage of their income is being spent on such things?
One thing I've never seen anyone speak of, and I have yet to read, anything recognizing the basic bottom-line fact: Those with lower incomes will spend all their money in the United States, while those with wealth are likely to spend in the Caribbean, the Riviera, the various Pacific island nations. With a sales tax, the wealthy could spend and spend and never pay a dime of tax... all they need do is buy from outside the US.
And don't even start on setting up tariffs and duties for imported personal things; tariffs, duties, and taxes on things like that are hard to enforce and could end up with a negative gain in tax revenues -- for every dollar collected it could well cost two dollars or more to hire and train the people necessary to keep the records, appraise the goods, impound, store and collect. The secret of making a profit -- which is what this country wants to do, or at least needs to do until the deficit is gone and a reserve built up -- is income exceeding the expenses of making that income.
The moral of this story? Complex problems are seldom solved with simple responses.
My proposal is for a flat tax. OK, it's not quite that simple but bear with me while I explain the skeleton of my thoughts. First, an integral part of "flat tax" is also a guaranteed minimum income for every man, woman and child in the country; if the person/couple/family income does not meet that minimum then they don't pay taxes -- in fact, for the program to work and be fair, the government would provide a stipend to bring income up to those minimum levels set. If a President wished to be magnanimous, s/he could cajole Congress into making all individual's annual income over five billion dollars tax free. (Gotta get them campaign contributions from somewhere, yah gno.) Bottom line would be that all income in excess of that "guaranteed minimum" amount would be taxable at a flat one percent (1%). Before you say that is too low, please realize that many wealthy individuals do not pay that much, not when you get down to the actual income received.
The flat tax would also hold for corporations. Unlike now, corporations would deduct dividends paid to stockholders; if not for the funds received for the sale of stock, the company would be hard-pressed to acquire adequate capital to get going. Stock values need to remain high for the company to benefit, and values go up when two things (we'll forget about speculation and market manipulation) occur: The assets of the company increase in value, and the dividends paid out amount to a good return on investment. Bottom line: Pay dividends, remain solvent. A bankruptcy, or even restructuring, doesn't profit anyone. (And don't worry -- those dividends will be taxed via the individuals who receive them.) If done correctly, mega-corps and conglomerates with brother-sister-mother-goodgriefgrettlemyfriend consolidated accounting that spreads the income so thin you can't find it via normal pathways, would be split into separate entities for tax purposes. This would serve to isolate the profit where it actually occurs and point out the money sink-holes that generate only losses. Unable to shelter their income with consolidated losses, corporations would have to start reconsidering business practices and do things that only show a profit, rather than hanging onto businesses that did nothing but eat up the cash. There should be only one exception to this profit-or-drop-it: Not for profit companies which "spent" at least 75% of "total gross income" in recognized charitable work. Corporate funds transfers to the NFP charitable company would be deductible, as would be employee expenses for individuals who worked periodically for the NFP with the parent corporation footing the employee salary and expenses.
Oh, the tax rate on corporations would be the same as for individuals: one percent (1%) of gross income. They could save so much money currently spent on creative accounting and conglomerations of funds transfers, that they would pay more taxes on the bottom line and save money at the same time. (No fees/salaries for those accountants which spent all year looking for ways to reduce the tax burden.)
Since I am not running for President, I will only mention in passing the things this new revenue would make possible: universal health care, pensions large enough to live on -- a total revamp of Social Security (not just retirement) and Medicare.
This type of total change, a turn-over in thinking, would not come easy for some. Many have spent their lives doing complex things to keep everyone befuddled and others feeling dependent, and this type of open honest change would be anathema to most politicians and high-level civil servants. They might actually tuck their tails and run for the hills! (Hey, a girl can dream can't she?)
Oh, one other thing: All elected Federal positions would be strictly limited as to how much money was collected and spent on campaigning. A limited number of public service announcements would be mandated for each newspaper and radio/television broadcasters; no amount of money could buy any additional space, nor additional air time. To successfully run, the candidate would have to go to the constituents on a face-to-face level. (Think we might also consider outlawing bill board ads and other similar eye-sores?)
If you have read this far, you've been given the opportunity to do a lot of thinking. Don't worry -- you can keep it a secret if you'd like. But on the other hand, you might look deeper and see if you personally could push for sane changes in all sorts of activities.
tiafn
P.S. Before you think I'm totally crazy, Google GDP -- Gross Domestic Product (formerly GNP) -- and compare one percent of GDP to current tax revenues
