Ah, right, I forgot about that.
I still contend that raising prices by 20% or so nationwide wouldn't be good for the economy. Yes, people would have more money to spend, but they would be discouraged froms pending due to the higher prices. People would realize that if they save and don't spend, they won't pay as much tax. If people spend less, the economy gets worse.
This is a myth. In most European countries, the sales tax is 17.5% to 25%. In Ontario, it is 15%.
If there is one fact of life, it is people like to spend money. A 20% sales tax will discourage some wasteful spending, but it will encourage saving instead. Both spending money and saving money are good for the economy in different ways.
Spending money stimulates supply and demand. Saving money finance the current deficit and makes the united States less dependent on foreign capital. Additionally, saving money stimulates the economy because you're injecting money into investments. The bank can lend your money out to other people, or you can put the money you saved into bonds and stocks, which is a direct investment in the economy.
The only way saving money will not benefit the country is if you take it out of the bank and stuff it in your pillow.
The benefits gained by eliminating income taxes and the saving billions spent each year by individuals and corporations to hire consultants (who needs to know the 17,000 page tax code) will be astronomical. The downside will be unemployment will go up initially, because the IRS and a lot of consultants and CPAs will be out of a job.
Incorrect. The CATO Institute's study clearly shows that this is not the case.
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