They Tell Me the CPA's Will Lobby Against it.
I read something today;
It was a story where Obama said Reagan wouldn't get nominated by the GOP these days because he needed to raise taxes and make cuts. Then I think the story ran off talking about the Buffet rule...
HOWEVER, it got me thinking. I figure now's the best time to share what I think is a sensible tax code.
Hang in there with me, it'll take a few minutes to get to the end, then you can think through your objections once you have the full picture.
My suggestion is to replace Income Tax with a Federal Sales Tax.
This would require each State to switch their revenue model to a Property Tax system.
Ok, calm down, let me finish!
Your net income, after paying your bills will remain the same, EXCEPT for those that legally skirt the system and pay less than their fair share.
Sidebar: A CPA once told me one of his millionaire clients has a tax return showing him slightly above the poverty level.
Before I describe how it will work, I need you to keep in mind that, today, we have states with and without sales tax. Typically, those without sales taxes have higher property taxes.
I will use my local area for my examples. Massachusetts has a Sales Tax, New Hampshire does not. Mass Property Taxes are lower than for a comparable home in NH. Add the Mass Sales and Property taxes and that is arguably the amount of Property Tax collection in NH.
I'll pause a moment while I address those that have already said "That's not fair, those renting won't pay tax!"
*Sigh*
No, renters pay property tax, and water and sewer and etc. It's included in their rent.
Here's how it would work:
drop Federal and State taxes from your paycheck and imagine the increase (12%-19% or so)
Suddenly you'll feel richer, BUT, everything you buy will have a Fed sales tax.
By that I mean EVERYTHING! Teapots, magazines, trucks, furniture, stocks, food, clothes, lottery tickets, EVERYTHING.
Ok. Legitimate pause time. Think about it. You already buy those things with the Money Left Over After Taxes! So, the money you used to buy those things that weren't taxed, was the money you already paid taxes on, so it's a wash for this bit.
Federal BENEFIT!
Our government will have a much more reliable and earlier report on the health of our economy. By monitoring sales tax they'll know how well businesses are doing BEFORE they rely on Unemployment statistics!
State BENEFIT!
Mass sales taxes have crept up as more people buy things online and in New Hampshire. That causes havoc as states feel the pinch from online sales. Plus, the NH side of the border is heavy with shopping malls, tire dealerships, and liquor stores. How nice would it be if we all paid the same price for our goods? How nice would it be to reduce traffic, especially around the holidays as people plan their NH shopping excursion, "just 45 minutes away!"?
(How nice would it be if we cut the amount of gas money we send to countries heavy with those that want us dead?)
Here's how we catch the scofflaws:
You've probably heard about those super rich that have a tax rate far below than the 'commoners'. Now, if the Feds rely on the sales tax for collection, that person is paying the same tax as the rest.
No more "Investment Income" taxed at a lower rate. Please, get real! Income is income, no matter how you earned it. (Psst, manual laborers feel that the lower Investment tax rate is an insult that translates into "let the stupid pay higher taxes.")
Now, here's the hard sell, but it makes sense if you look at the big picture. Again, EVERYTHING must be taxed. This means that we might have to look at a "Value Added Tax" type of requirement for businesses. I won't try to explain a VAT, nor is what I'm proposing a true VAT. Here I'm saying that the store that sells us things also pays taxes on what they buy to sell to us. This again gives the gov't an idea on how the economy is moving, and does at least 2 things. First, it protects us from the grocers that think that by stealing their own food, they're avoiding taxes. Second, it starts to clear out our supply chain by having taxes cut into the profit of those that ' buy and sell just to make a markup'. This means that every business that buys and resells goods will have to increase their selling price to cover their new cost from the new tax. If there is a true Value Added by a middle-man, then the consumer will accept the increased price because of the Added Value that company offers.
This should also eat into those people that speculate on commodities. Imagine how much more stable oil prices would be if speculators had to pay tax on the oil that they're tying up.
I shall stop here. This is just a general overview, and I won't put you to sleep with an even longer post.
I recognize the fact that this is a major change, and that would be scary. I also don't think we'll loose jobs over this. Sure, the accounting industry would see a reduction since there won't be a need for people to process all the tax evasion forms and schedules that have piled up in our tax codes. But those people will find work resulting from the boost to the economy. Wait, are you asking what boost? Well, I mean the boost we'll see as the tax money the super-rich legally avoided paying now goes to the government saving the regular folks just a tiny bit more. But believe me, a tiny bit multiplied by hundreds of millions of Americans WILL spur business. ESPECIALLY the smaller shops that first feel the recessions coming.
