Why To Oppose A National Sales Tax
You may not have heard about it yet, since Bush is obsessed with destroying social security, but his plan for revamping the income tax code basically consists of eliminating the income tax and replacing it with a national sales tax of 23.5%. While in theory this is a decent idea, here are three key reasons why it shouldn't be allowed to happen:
1. Increased tax burden on those who do not pay income taxes.
-This hits me hard. Since I only made about $1200 last year and payed no income taxes, having to pay a national sales tax would hit me where I hadn't had to pay before. This applies for most teenagers who work part-time jobs, and actually for anyone who works part-time. This tax, therefore, would add extra burden to the poorest of the country, something Bush seems to care little about avoiding (look at his tax cut policies in 2001).
2. Sticker shock will crash the economy.
-23.5% is not a small number. Instead of buying a $200 TV, for instance, you would be buying an almost $250 TV. While this may seem reasonable since you are no longer paying an income tax, the drasticaly higher prices will scare consumers, even subconsciously, from making some purchases. Consumer spending may drop as much as 5% after the implementation of this tax. Usually, if consumer spending doesn't rise at least .5-1.5% something is wrong with the economy, so a drop of 5% would be catastrophic, causing a stock market crash and a severe recession, if not a full-blown depression. Even gradually phasing in the tax (at say, 6% a year) would cause a less drastic effect on spending, but would be spread out over a period of a few years since prices are constantly rising, eroding consumer confidence and hurting spending further.
3. Potential for deductions at the upper end of the spectrum.
-It has already been stated by adminstration officials that food will be exempt from a tax, being such a necessity of life (it's actually supposed to be exempt from state sales taxes too). There is probably a good chance that massive purchases, such as a house, will also be exempt from taxation, since a $200,000 house would become a $247,000 house, a serious extra burden. This itself is a foolish idea, since it will decrease government revenues, a dangerous thing in this time of deep budget deficits. The real fear I have though is that this will be turned into a blanket exemption for everything over, say, $150,000. Who buys things over $150,000? Why, the rich of course. It is little stretch of the imagination to foresee the Bush administration exempting such purchases as yachts, mansions, and private jets from taxes under the same law intended to prevent a drastic increase in housing costs. My fear is that this tax will be used as just another vehicle to allow the rich to evade taxation, like the elimination of the Estate Tax in Bush's first term.
So that is why a national sales tax must be suppressed, preferably before ever getting to a congressional vote, where Republicans of all stripes will back it.
04.25.05 EDIT: The Estate Tax bill just passed a short while ago. It's been in the news and I somehow missed by, oh, four years.
1. Increased tax burden on those who do not pay income taxes.
-This hits me hard. Since I only made about $1200 last year and payed no income taxes, having to pay a national sales tax would hit me where I hadn't had to pay before. This applies for most teenagers who work part-time jobs, and actually for anyone who works part-time. This tax, therefore, would add extra burden to the poorest of the country, something Bush seems to care little about avoiding (look at his tax cut policies in 2001).
2. Sticker shock will crash the economy.
-23.5% is not a small number. Instead of buying a $200 TV, for instance, you would be buying an almost $250 TV. While this may seem reasonable since you are no longer paying an income tax, the drasticaly higher prices will scare consumers, even subconsciously, from making some purchases. Consumer spending may drop as much as 5% after the implementation of this tax. Usually, if consumer spending doesn't rise at least .5-1.5% something is wrong with the economy, so a drop of 5% would be catastrophic, causing a stock market crash and a severe recession, if not a full-blown depression. Even gradually phasing in the tax (at say, 6% a year) would cause a less drastic effect on spending, but would be spread out over a period of a few years since prices are constantly rising, eroding consumer confidence and hurting spending further.
3. Potential for deductions at the upper end of the spectrum.
-It has already been stated by adminstration officials that food will be exempt from a tax, being such a necessity of life (it's actually supposed to be exempt from state sales taxes too). There is probably a good chance that massive purchases, such as a house, will also be exempt from taxation, since a $200,000 house would become a $247,000 house, a serious extra burden. This itself is a foolish idea, since it will decrease government revenues, a dangerous thing in this time of deep budget deficits. The real fear I have though is that this will be turned into a blanket exemption for everything over, say, $150,000. Who buys things over $150,000? Why, the rich of course. It is little stretch of the imagination to foresee the Bush administration exempting such purchases as yachts, mansions, and private jets from taxes under the same law intended to prevent a drastic increase in housing costs. My fear is that this tax will be used as just another vehicle to allow the rich to evade taxation, like the elimination of the Estate Tax in Bush's first term.
So that is why a national sales tax must be suppressed, preferably before ever getting to a congressional vote, where Republicans of all stripes will back it.
04.25.05 EDIT: The Estate Tax bill just passed a short while ago. It's been in the news and I somehow missed by, oh, four years.
posted by Jimmy at 10:20 PM
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