TAX the WEALTHY: But do it responsibly.

 

  I believe in the equality principle when it comes to taxes. I believe in tax neutrality which means our government shouldn’t discriminate against any American. We all have to pay a fair share that is tax neutral. As an example:

  Replacing our whole tax system on one based on income earned to one based on income spent (National Sales Tax). If you want lobbyist out of our tax code what quicker way to remove them from it? If you want to stop loop holes what better way is there?

  If you are worried about politicians abusing this new tax code, it would be very easy to insure politicians don’t abuse such power in our tax code.

You pick a percent… say 40%. Make a law that says the federal government cannot exceed the national sales tax of 40% in any category. Start the federal tax off at say a flat rate for like products, goods and services.

 

In this example, I am going to use motor transportation like products and group them together

Motor Transportation: Cars, Trucks, boats, planes, motorcycle, mopeds, Scooters, 4-wheelers, bobsleds, etc… at 8% flat federal national sales tax rate.

 

For the argument that this will hurt the poor and senior citizens more than anything. Here is your equalizer built into this new tax plan.

 

(1) No tax on medicine; Period. I would encourage states to follow suit also and not tax medicine. No need to explain here how this would help.

(2) No tax on food you can buy and prepare yourself; farmers market, grocery store = no tax. So a restaurant can buy direct bread from a bakery, meat from a cattle ranch, lettuce from a farm and there is no tax… which should drive their prices down.

(3) New retail products, goods and services taxed only; that means a used car, house, second hand stores are federal tax free. Encourages buying used versus new all the time. Not only lowers prices but is smart environmental sense too.

 

Now let’s take point (3) and apply it to the 8% federal motor vehicle tax to spending in real life:

I am a person making $20,000 a year. Do I buy a new or used car? It is my choice. But I know if I buy new, I will be paying more on taxes for it, but if I buy used… I will not have to pay a federal sales tax. Same rule applies to a person who earns $100K, $200K, $200,000K!

Guess what, who do you think is more likely to buy a new car and pay federal taxes?

 

There is your (1) tax increase on the wealthy, yet still (2) helping the poor, (3) applying the equality principle, (4) increasing those who pay into our tax system who are here legally or illegally, (5)  getting special interest out of congress, getting everyone on the same page and (6) no one is paying more than anyone else (unless they want to) and so much more.

 

Keep in mind...

  No rate could exceed 40% (as an example). I would also include the safeguard law, after the starting rate is established, it cannot exceed an increase more than ½ percent a year .

  So, if a motor vehicle tax started at 8% it could possibly be increased the next year at a max of 8.50%. So in this category it could reach 40% in 16 years!

 

This is just a quick snap shot that puts people in power of paying or not paying more for something for federal tax purposes.

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Comment by Stephen Brassawe on November 30, 2012 at 8:13pm

It is an entertaining proposition to think through with you, John. You present it as clearly as it can be presented in so few words. Furthermore, you have tried to address what has been the overwhelming objection in the past to a sales tax, that is, its disproportionate effect upon the poor.

Needless to say, I have no idea how the numbers would work out in terms of generating sufficient revenue for government, however one defines “sufficient.” I suspect that would require some impressive calculation by an economist, impressive even by economists' standards. But let's set that aside.

I understand you want the lobbyists out of the tax code. At the outset, however, every lobbyist in the country would battle the enactment of this with the possible exception of the lobbyists for Big Pharmaceuticals. In what I see sadly, but I think accurately, as a new global economy totally fired by consumerism, many would see this system as instituting a disincentive for consumers to purchase new consumer goods, which would be anathema to a lot of powerful people.

Comment by John Fleshman on November 30, 2012 at 8:45pm

Stephen, thank you for stopping by, reading and your comments.

I used the fair tax as a base and have been adding to it or modifying it to try to make it better since early 2011; I have tried to meet with my representatives lead economist to see if they could query an estimate to see how much revenue this would generate; that is the unknown.

As you can see I incorporated the flat tax (which is also very popular with some) to like products, goods and services grouping. I had to do an ethics paper in 2011 and spent a good 16 weeks studying different tax ideas. None of which represented the equality principle, so I created a hybrid tax system that I believe will work. I am just not good enough to give an estimate.

I could see lobbyist fight to try to get say one product moved from one group to another… which may occur; nothing is full proof from crooks. But you are right; the lobbyist would be out in force not to see this idea implemented.

The other idea I have is with import tax… but that will be for another day. We have to make America the choice location to start a business, build a manufacturing plant, want its Headquarters located, etc… we are losing this fight and it is costing us jobs, economic growth and not to scare anyone but a form of national power. A bad economy is not a sign of strength.

Thanks again for your comments.

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