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Originally Posted by flstf
Before we can propose a more fair tax system I think it is important to understand how much taxes we are paying now. The following was asked in another forum a while back and was never answered as far as I know:
As far as folks objecting to a national sales tax or VAT. Don't we pay something like those already? Doesn't all the income tax that people pay show up in the price of goods and services already?
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Current estimates put our "total" tax rate at or near 50% or our income. This includes income tax, rocking chair, medicare, sales tax, property taxes, etc., etc., etc.
Yes, we already pay many consumption-based taxes. The idea behind this plan is to pretty much only have consumption taxes. As posted in the beginning, the following would be abolished: Income/Capital Gains/Estate/Gift/Some excise, etc.
The theory is (and it is only a theory because it hasn't been tried yet) is that the price of bread will go down on a NST or consumption tax. First, it should be noted, that most people don't pay taxes on bread. Second, you have to account for all of the money saved by a company not having to pay millions/billions of dollars on tax compliance. If costs go down, more than likely prices will go down, our economic system pretty much demands that this happens.
Look at it this way, using the loaf of bread as an example:
Cost of bread: $1.00
Taxes: $0.20 (using a number I am pulling out of my ass)
Remember: Your income will automatically go up once the plan is put into action, probably in the neighborhood of 18-22%. Also, the cost to make the loaf of bread could very feasibly go down because the manufacturer is wasting man-hours and money on tax compliance. Also, since they have "new" money, it could also be feasibly spent on machinery that will make the bread faster, cheaper, etc.
So:
In relative dollars, the new cost of the loaf of bread (including the consumption tax) could stay at the rate of $1.00--no real cost increas/decrease felt.
Also, your first purchases of $18,588 are tax free. That means, averaged over the whole year, the real cost of the bread could be less than $1.00--a decrease that would be felt by all consumers.