Axiom Home Page Forums General Discussion The Water Cooler OT: politics

I share BigWill's concern over the 23% sales tax. I realize in the long run it would save people money, but that 23% slap on everything you buy would certainly stifle consumer spending.

Spiff... You would see an economic boom unlike any other in history. The person making $1000 per week would keep the WHOLE $1000 ... plus get another $75 from the Government.. Right now, they take home about $700 ... even if they spent the entire $700, their tax would be $161 ... totalling $861...leaving $214 more each WEEK in disposable income.

When people buy stuff, they look at the total cost versus what they have in the checkbook ...

BigWill, Chime in here, how would giving the average family earning $1000 per week an extra NET of $214 per WEEK HURT sales of goods and services ?

I do see your point, but do you not see mine at all? It would be quite a radical change. Has something like this been proposed, or even done, on a state level? If so, what were the results?

Don't get me wrong cs, I actually like the idea.

I like the idea too, and I'll even go one further. I don't know that it is completely horrible if it does cut spending a bit. I think it is ridiculous how many people in this country have credit card debt, or in general are just over their heads in debt. Could this perhaps slow their spending some and make them a bit more responsible? Or perhaps these people are just hopeless and will continue to spend all they can no matter what.

It's the American way!

Now that the election is over, I'll dare to venture into this thread, but only to make a clarifying point. Since taxation is one of the areas that I do, I'll point out that the FairTax proposal re-introduced last year as H.R. 25 contains a 23% sales tax calculated on a tax inclusive basis, which is a valid method of stating a tax, but which is sometimes misunderstood. State sales taxes are calculated on a tax exclusive basis, i.e. on the cost of the goods or services before the tax is applied. $100 purchased subject to a 23% tax inclusive rate doesn't result in a tax of $23, but rather one of about $29.90. The formula to convert the tax inclusive rate to the equivalent tax exclusive rate is [1/(1-.23)]-1, or about 29.9%, the tax exclusive rate equivalent to a 23% tax inclusive rate. In other words, of the total cost of $129.90 including tax, the $29.90 tax would be 23%.

OK, I'm not a pro on this topic of the Fairtax, but I've heard enough that I'm sold on the idea.....at bare minimum for the simplicity of it. Consumers will spend no matter what, especially if they have more money in their pockets.

As far as the concerns about it stifling consumer spending, I think that the counter-argument from advocates is that manufacturers and distributors pay a butt-load on corporate taxes right now, all of which is built into their pricing. If you remove those taxes, which is part of the plan, you will ease the financial pressure and the cost of doing businesses on those companies. One would naturally be concerned that they would just pocket these added funds and screw the consumer. The counter to that is two-fold based upon our capitalist system. First, if they do choose not to reduce their pricing, then the further desire for more wealth is probably going to drive those businesses to expand operations, ie more jobs and $ into workers pockets. The more plausible outcome will be that the competition in the marketplace will force them to reduce their prices accordingly in order to maintain/gain market-share. If you have five businesses providing the same service/product and they see a 20% drop in their expenses, one of them will undoubtedly drop their prices accordingly in order to gain an edge w/ our savvy consumers. In order to compete, the rest of them will follow suit. The winner is the consumer.

In theory, this reduction in corporate taxes would result in lower costs on goods purchases. That being the case, we'll have no income tax (5 months of pay not going to taxes) and cost of goods purchased will adjust to relieve the pain of increased sales tax. You have a wash on the taxes, but a net gain resulting from the reduced pricing. Sounds damn good to me. The only people that are screwed in this is the IRS......and I say screw them!!!!

Don't forget about all those tax prep services, like H&R Block, that would go out of business, too.

I suppose the disincentive to buy created by a higher sales tax may be offset by higher incomes and possibly lower prices. I don't know if it will work, or be fair, but putting the IRS out of business sounds like reason enough to give it a try.

Hmmm...just spent some time going over that website. Sounds like a pretty darn good idea. Almost too good. My concern is that they are expecting some major "trickle down", and things don't tend to trickle as much as people tend to hope. The constant quotes of consumer prices dropping 20-25% seemed a bit "pie-in-the-sky" as well. That site paints a very rosy picture. Like I've said though, it seems like a terrific idea. I'd like to hear the other side of the story before I decide whether or not I'm for it though. Any good sites stating the opposing view?

I've noted a couple of flaws already though. No tax on used goods? Why would ANYONE buy a new car ever again? The music/dvd industry...what would keep a business from simply opening all their cd's and dvd's and selling them as "used"? (Please don't tell me good morals.)