Federal Sales Tax

[A18]

How many dollars worth of goods and services are sold each year on a consumption level?

Anyone know?

Or at least, does anyone know what the economic term to describe this is? I can do a Google search if I have that much.

[John Dibble]

I believe it's the Gross Domestic Product, which www.nationmaster.com defines as the "value of all final goods and services produced within a nation in a given year".

Ours is $10.45 trillion (2002 est.), or $35991.96 per person.

[A18]

Thanks.

Unless I'm making some mistake...that means that all things being equal, a 10% federal sales tax would be necessary. That's too high, IMO.

If we cut the budget in half though, a 5% sales tax seems very reasonable to me. Maybe cut it a little more, since it's a consumption tax.

[The Duke]

GDP also includes government spending, which wouldn't be taxed since govenrment wouldn't tax itself, and investment spending, which would no be covered by a consumption tax.  A more accurate figure for a sales tax rate might be 22%.

[John Dibble]

$2.052 trillion, that's what nationmaster says the government spend in 2002. If my math is correct then it would have to be 20% - definitely need to cut spending in half, 10% wouldn't be too bad since payroll and income taxes would be eliminated.

[David S]

Its $2.15 trillion for 2003 according to the CBO. http://www.cbo.gov/showdoc.cfm?index=1821&sequence=0#table1

I think John Ford is right in saying that GDP includes government spending and they definitely don't tax themselves.

THE GDP for 2003 was $10.98 trillion. Deduct govt spending of 2.15 trillion. That leaves $8.83 trillion taxable money. You need to take about 24% in sales tax to fund the current level of spending. (Think what that would do to the price of a $200,000 new home!) Although at that level the sales tax would eliminate the need for personal income tax, payroll tax, corporate tax and all other federal taxes. It would also eliminate the deficit.

The bottom line is government spends way too much and the only chance of getting its spending reduced to an acceptable level is to elect Badnarik.

[muon2]

I've seen analyses that show a Federal Sales tax of 17% would cover the income tax receipts. There are other revenue streams to the Feds so one does not have to cover all current spending with  sales tax.

[??????????]

www.fairtax.org

[I spent the winter writing songs about getting better]

Bad idea. I'd have to pay federal taxes which i currently am not eligible for, my cost of living would go way up, and in order to afford food and my monthly rent I wouldn't be able to buy collector vinyl or hair gel or hard liquor anymore. What a terrible thought.

[David S]

Bad idea. I'd have to pay federal taxes which i currently am not eligible for, my cost of living would go way up, and in order to afford food and my monthly rent I wouldn't be able to buy collector vinyl or hair gel or hard liquor anymore. What a terrible thought.

I now see a serious problem with the sales tax. It would cause BRTD to stop buying hair gel which would plunge the economy into depression.

I am forced to concede that a much better plan would be to seize BRTD's hair gel, sell it, and redistribute the proceeds, in the name of the common good of course.

[Nym90]

GDP also includes government spending, which wouldn't be taxed since govenrment wouldn't tax itself, and investment spending, which would no be covered by a consumption tax.  A more accurate figure for a sales tax rate might be 22%.

Of course, I would assume that all such analyses are failing to take into account that consumer spending would go waaaay down, given the fact that we would essentially have 22% inflation overnight. That would greatly reduce the amount of revenue generated.

[A18]

Correct, but since the point is to repeal the income tax, it wouldn't actually matter that prices are higher.

[A18]

http://www.cato.org/pubs/pas/pa-272.html

This study, while outdated, calls for 15 percent sales tax on the final purchase of goods and services at the retail level.

This would take the place of "individual and corporate income tax, the capital gains tax, the estate and gift taxes, and non-trust-fund excise taxes." It would not replace the payroll tax.

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Are there any statistics on what percentage of that consists of food and clothes?

[John Dibble]

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Are there any statistics on what percentage of that consists of food and clothes?

I don't think so, I can't find them anyways. Here's all the economic stats: http://www.nationmaster.com/country/us/Economy

[dazzleman]

GDP also includes government spending, which wouldn't be taxed since govenrment wouldn't tax itself, and investment spending, which would no be covered by a consumption tax.  A more accurate figure for a sales tax rate might be 22%.

Of course, I would assume that all such analyses are failing to take into account that consumer spending would go waaaay down, given the fact that we would essentially have 22% inflation overnight. That would greatly reduce the amount of revenue generated.

Very true.  It's nice to see you use some conservative logic, Eric. [I hope you know I'm just busting your 'nads.]

I think a high sales tax is a terrible idea.  It is highly regressive, and would hit lower income people very hard, since they are required to spend most of all their income, as opposed to higher income people, who are able to save a chunk of their income.

I think the current system, whatever its flaws, is preferable to this idea.

[○∙◄☻¥tπ[╪AV┼cVê└]

The idea was to have this tax be very regressive - taxing stuff you need to survive, but not taxing investments. The tax rate would have to be huge. This is a terrible idea.

[A18]

That is completely, blatantly, 100%, without exception false, and people need to quit repeating it.

People have more money. Prices go up, people's incomes go up in proportion. No net effect.

A federal sales tax would not be regressive if we made the first several thousand dollars of consumption tax free with a simple rebate paid by the Social Security Administration.

Chart:


Alternately, we could exempt food, clothing, rent, etc.

[A18]

The idea was to have this tax be very regressive - taxing stuff you need to survive, but not taxing investments. The tax rate would have to be huge. This is a terrible idea.

A 15% sales tax is not huge.

[○∙◄☻¥tπ[╪AV┼cVê└]

The idea was to have this tax be very regressive - taxing stuff you need to survive, but not taxing investments. The tax rate would have to be huge. This is a terrible idea.

A 15% sales tax is not huge.

It would have to be more than that.

In any case, sales taxes are quite regressive.

[A18]

The idea was to have this tax be very regressive - taxing stuff you need to survive, but not taxing investments. The tax rate would have to be huge. This is a terrible idea.

A 15% sales tax is not huge.

It would have to be more than that

No, and it could actually be less, if we didn't repeal corporate taxes.

I already went over the two ways we could make it progressive.

[○∙◄☻¥tπ[╪AV┼cVê└]

The idea was to have this tax be very regressive - taxing stuff you need to survive, but not taxing investments. The tax rate would have to be huge. This is a terrible idea.

A 15% sales tax is not huge.

It would have to be more than that

No, and it could actually be less, if we didn't repeal corporate taxes.

I already went over the two ways we could make it progressive.

Making it more progressive requires the rate to go up.
So which taxes exactly would it replace?

[A18]

With a 15% rate? Individual and corporate income tax, the capital gains tax, the estate and gift taxes, and non-trust-fund excise taxes.

I don't know how much money the government collects from the corporate income tax, so I don't know what the effect would be.

[○∙◄☻¥tπ[╪AV┼cVê└]

With a 15% rate? Individual and corporate income tax, the capital gains tax, the estate and gift taxes, and non-trust-fund excise taxes.

I don't know how much money the government collects from the corporate income tax, so I don't know what the effect would be.

From the 2004 budget as percentage of GDP
Individual income tax 7.0%
Corporate income tax 1.6%
Excise taxes 0.6%
Estate taxes 0.2%
Deficit 4.9%

http://www.cbo.gov/showdoc.cfm?index=1821&sequence=0


That means that to keep the current deficit, 63% of the GDP has to be taxed at 15%. That's probably too high, since they exclude investments from the tax.

To close the deficit, too 95% of the GDP has to be taxed at 15%.


It's going to have to be a lot higher than 15%.

[A18]

Any number substantially higher than 15% is a plan to repeal payroll taxes, which we wouldn't do.

[○∙◄☻¥tπ[╪AV┼cVê└]

Any number substantially higher than 15% is a plan to repeal payroll taxes, which we wouldn't do.

What fraction of the GDP will be taxed?
1. The Republicans have already said that they're regressively exempt investments
2. The government's own spending isn't taxed
3. You claimed this would somehow be progressive, which would require tons of more exemptions

That leaves only a fraction of the GDP.