Conservative economics

[Guest PlatinumBoy]

Goods would be cheaper as well, since companies wouldn't be taxed. Though I am Conservative, I do think that even with a sales tax, the highest bracket should still pay taxes (much, much smaller than they do now--but we don't need the days of Vanderbilts and barons and such), and I think that the poor should get some sort of help. It is frustrating to see just HOW much is wasted with taxes--and how much we have to pay, etc. etc. It is true that a sales tax would affect the poor more, but keep the IRS or what not to help them out.

[jesse_ewiak 0]

Again...from the article I quoted before...

 

current proposal by Rep. John Linder (R-GA) says that a 23 percent rate would be adequate. But such a low rate can only be sustained by making completely absurd assumptions about what would be taxed. Every serious economist who has ever looked at this question has concluded that a vastly higher rate would in fact be needed.

 

First, an unstated assumption is that the 23 percent rate proposed by Mr. Linder is comparable to existing state and local sales taxes, where the tax comes on top of the purchase price. Thus, a 5 percent sales tax on a $1 purchase comes to $1.05.

 

But that's not the way the Linder plan works. He deceptively calculates the rate as if the tax is part of the purchase price. He calls this the tax-inclusive rate. Calculating the rate the normal way people are accustomed to with state and local sales taxes would require a 30 percent tax rate, not 23 percent.

 

When Congress's Joint Committee on Taxation scored the Linder proposal 4 years ago, it estimated that it would actually require a tax-inclusive rate of 36 percent, not 23 percent, to equal current federal revenues. Calculating the rate in a normal, tax-exclusive manner would mean a 57 percent rate.

 

Economist Bill Gale of the Brookings Institution notes that supporters of the sales tax assume that there will be no tax evasion under their proposal and that the size of government will not grow, even though they would send a large annual check to every American in order to offset the regressivity of the tax. Making realistic assumptions, Mr. Gale estimates that the tax-inclusive rate, comparable to Linder's proposed 23 percent rate, would actually have to be about 50 percent. A rate comparable to existing sales taxes would be close to 100 percent.

 

And let us not forget that state and local sales taxes would come on top of the federal sales tax, pushing the total rate even higher.

 

Obviously, the federal government is not going to impose tax rates this high, nor would anyone pay them if it did. There would be a massive tax revolt.

 

The Linder bill (H.R. 25) is also deceptive in its basic assumption that all consumption of goods and services in the U.S. would be taxed. Implicitly, Americans would be taxed on, among other things, all medical care, purchases of new homes, and services provided by state and local governments if Linder's bill became law.