braisler

Actually, no. I was referring to the speculation that a reduction in corporate taxes would result in a reduction in costs of good at market. This was mentioned earlier in this same thread referring to the cost of a DVD player purchased for a set dollar amount. Part of the cost of bringing that DVD player to market is the tax burden that the corporation pays, ie. corporate taxes, payroll taxes, etc. If you remove that tax burden, the corporation could potentially bring the same product to market at a lower price point. Instead of paying $100 + 6% sales tax for a total of $106, you might pay $80 + 35% sales tax for a total of $108. Not withstanding that current sales tax is locally collected and used by the states, I think that you can see how this situation might work.

Of course this is based on the idea that corporations would be willing to convert their lower costs in producing goods to a lower market price for those goods. I think that the market would demand that they do. If one industry is making significantly larger profits than another, and there are not undue barriers to entry, other companies will enter that business and drive prices down by competition.

I disagree. I think that Americans do not need any more encouragement as consumers. As a nation, we consume too much, we are in too much debt, we save too little for retirement. If anything, we need to stop the consumer culture that leads to waste and encourage both governmental and personal fiscal responsibility. And for every person who did cut their conspicuous consumption of taxable goods, there would doubtlessly be some other citizen who would step up and gladly spend all of their extra money on taxable goods.

Further your argument that a larger sales tax would discourage consumption would be the equivalent to arguing that increasing income tax discourages people from working. If I have to pay tax on any income I have from working, then I am going to work the least I have to in order to survive. That would reduce my tax! Sounds silly? People always want things to make their lives more comfortable and pleasant. An increase in the sales tax is not going to keep your neighbor from buying that bike for his kid.

I don't think that everyone needs to pay the same amount into the government for the system to work. Certainly, no one can live in a vacuum. I still have to buy clothes, own a car, and I like to eat dinner out once in a while. All of those things would subject me to a sales tax. But I don't have to shop at designer stores for my clothes. I don't have to buy a brand new car every three years. I don't have to eat all of my meals at $30/plate restaurants. Those are the ways that I might choose to reduce my tax burden. Is that bad for the economy? No, I don't think so. There will still be other people with other priorities that choose to do those things for their own reasons. Would the amount of tax coming in to the federal budget drop dramatically? I don't think that it would. I am sure that they could structure an appropriate VAT % that would provide for losses due to reduction in other taxes.

Reflectively, the government could do well to reduce its own consumption as well. There are certainly essential government functions, providing for the national defense and common welfare of all citizens. But there are also lots and lots of federal programs that could be cut without negative impact to the citizens of this country. I am sure that everyone has a few pet ideas of which programs could be cut where, so I won't go into them here.

I was hoping to introduce the idea that an income tax, or a tax on wages, is not the only way that the federal budget can be funded.