i dont mean to derail, but would you mind just explaining how that could work for consumption taxes? one quick post, then we'll put it to rest, i promise. im just intensely interested.
The bill has been on the floor for years, in the Senate I think.
1.) No more IRS. No estate, corporate, capital gains, income tax.
2.) A federal sales tax of somewhere around 30%, collected and managed pretty much the same way state and local sales tax is currently handled.
3.) A monthly credit everyone gets on a debit card that is equal to the average expenditures in your county/state for someone who makes $X (poverty level or whatever). If you don't even make enough to spend that much, then this is a net plus.
It's a revenue neutral plan, so the government is taking the same amount out of the ecomony.
People argue that taxing consumption would kill the economy, but you have to realize that the extra income everyone would have, plus the reduced cost of doing business, would actually make consumption equally, or likely more, affordable than before (the "more" comes in when businesses move jobs back into the US, adding more jobs, and corporations significantly reduce their overhead in trying to understand, predict, and manage their tax liabilities, reducing the cost to produce). Also consumption is historically much more stable than income, so revenue would fluctuate less.
People also contend that it is highly regressive, because the wealthier you are the less you spend on consumption. This gets into a deeper discussion on the value of that money to the economy as investment capital creating jobs and such, but regardless, some plans include a small but highly progressive income or capital gains tax to keep the wealth envy in check.
but you are also disincentivising spending at the same time. You're conveniently ignoring that fact.
And the current tax disincentivizes working, which overall is much less resistant to incentives and much more unstable. That's a big part of the point. The money has to come out somewhere, better in consumption than in production.
If such a tax rolled out, likely people would go out on a significant spending increase right before it hit, sending the economy unnaturally into the black, and then after it hit that would trail off, long enough for companies to figure out the huge benefits of having no corporate taxes and also firing all of their highest paid lawyers, and in order to get themselves out of the spending dip, start cutting prices like crazy (which they can afford to do while maintaining profits), until everyone realizes that they have more money and
prices are now not nearly as higher as they thought they would be, which should prompt them to quickly return to what they love doing, buying big TVs.
Businesses will lay people off at the slightest hint of a downturn and won't hire them back until well after the ensuing recovery. That's why taxing employment sucks. On the other hand, people want that new TV really bad and will only hold off on buying it if they really can't afford it, and will buy it the second they can afford it again.
Also the tax gets spread across everyone and across a broader span of their lives, not just income earners during their working years.