Monday, March 19, 2007

Sales tax can not replace all income tax revenues

The U.S. Congress should not and will not imprudently transfer our entire major government revenue from income tax to consumption tax in a single step. Those who advocate otherwise would effectively hinder if not actually prevent congress from passing any federal sales tax.

I believe that all democratic nations dependent upon consumption tax as a major revenue source also have an income tax. IMO that’s due to voters balking at unacceptable tax rates. If a gradual complete transformation (from income to sales tax) is begun and I’m incorrect, a complete transformation could be accomplished in approximately four years.

If all major nations that employ consumption taxes are correct, the transformation would be halted when sales tax increase approach an unacceptable rate. At that time USA’s income tax rates will be greatly decreased. Lesser dependence upon income taxes revenue would then be an opportunity to equalize the remaining income tax’s burden.


Chad Sargent said...

I beg to differ with you. The 23% embedded rate has been verified by economists to be revenue-neutral with the current tax code.

Here's the research on the subject.

A conversion to a sales tax base is the only tax reform that will solve the problems created by our income-based tax code.

Income is the wrong base for a tax system. The FairTax is the only consumption tax-based replacement plan that removes considerations of being regressive, and is truly progressive, because the more you spend, the more tax you pay. has all the research and information to explain the benefits of the FairTax.

Blake Gunnels said...

"I believe that all democratic nations dependent upon consumption tax as a major revenue source also have an income tax."

Your above statement is incorrect. The state of Florida, though not a democratic nation, depends on a sales tax for its revenue and has no state income tax.

supposn said...

Chad, I iterate that I'm dubious of that 23% figure.

If I could accept the 23% figure, it's unacceptable upon it's face. Many states have a sales tax. IMO many more states will similarly adopt sales tax as their major tax source. I'm familure with two localities where sales tax exceeds 6%. One of them exceeds 8%.

I can contemplate federal, state and local taxes that could approach or exceed 1/3. You don't think there's some limit to accceptable total rate's of sales tax?

One of the reasons states will turn to sales tax is court's attacks upon property tax as an inequitable, (and thus illegal) method of complying to a state's laws mandating public education.

supposn said...

Blake, I believe any major democratic nation utilizing a sales tax as a major source of their revenue also has an income tax. It's not their preference. It's their necessity.

Respectfully, Supposn

supposn said...

Chad, Blake, how did you guys find this blog? I'd like to learn how to find blogs on economic topics.

Respectfully, Supposn