You must be TRULY wealthy. Congratulations.
Well, let’s just say even if I died next year, I’d still be paying estate taxes.
Right now, between Federal, state, local, FICA, medicare, sales, property, auto tax, I pay out somewhere around 40% of my income to the government in tax.
So you would lump social security and medicare in? So everyone who simply buys things gets the benefits, or would it stay seperate so only workers pay in and maintain accounts? Same for unemployment insurance, everyone would pay in?
Aside from those details, why would property taxes go away, or, for that matter, state sales tax? Are we going all federal? That is, can municpalities no longer make capitol investments, etc.?
Last, are you sure it is 40%? At your income level I’d expect you to be gettting a decent morgage interest deduction. Also, at your bracket, I’d be expecting a bit of investing and savings, which are, of course, potentially taxed at a lower rate.
If I ended up paying out 27-28% VAT on EVERYTHING
Again, is it really reasonable for all localities to have the same rates? Where the cost of living is higher, public sector entities pay the higher rates as well.
Consider this:
- The “underground economy” would be taxed. If you get paid cash under the table, you’d still pay the tax when you bought something.
Wouldn’t it just get bigger? That is, instead of just cash under the table, would 30% be enough incentive for swap meet type commerce?
- I have heard some who want to tax all transactions (to include all parts of the supply chain), but I’m not in favor of that, as that would have an inflationary tendency.
That is what occured to me. On the other hand, if you exempt consumption at the ‘non consumer’ level, doesn’t that inherently create a bunch of loopholes?
- I have heard those who would favor allowing a rebate of taxes paid for up to 2 times the poverty rate in sales. That sounds like a good plan to me, because, as you point out, for those in the lower tax brackets, the tax would be perceived as regressive.
That sounds pretty reasonable to me. At the bottom brackets, it would be a whopping hit. Without some protection it seems that it would either drive inflation or create poverty. On the flip side, I hate the idea of collecting the money from working poor families (who could really use it for things like health care), holding it (presumably without interest) and then spending money giving it back.
Maybe somebody with your degree of wealth doesn’t need to worry about tax, but for those of us who are in the upper-middle class, it’s a stranglehold. If it wasn’t my family’s means of living, it would be funny to hear a politician call me rich. (We’re not poor…but hardly rich). When I have to watch what I spend, when I get worried when the weather is too cold or too hot (as it might shoot my gas and electric bill way out of budget range), when I have to tap dance twice a year when car insurance bill comes in, the adjective “rich” is simply not appropriate.
That’s a little unkind. I pay a lot of tax, and I certainly did not grow up rich, I was born in a house without indoor plumbing. Because of two tours of combat service, I was entitled to some education benefits after Vietnam, but I still worked my way through school.
“Rich” is relative. I know a fair number of people in similiar circumstances to ours, and, like you, they would laugh at being called rich. But you would look at them the way that most people in the world (who have a net worth of about $2000) would look at you.
I’m not trying to be dismissive, I just think that we live in a culture that obsesses on idle weaith, so we tend to think about what we don’t have instead of counting our blessings.
But, the part that still concerns me is the rates you are talking about. I understand you don’t want your income tax to change 2-3% on revenue outside your deductions and in that bracket. But I’m looking at our current situation. We have a $400B structural deficit and $9T in debt. We already need to consider a significant contraction. And we have already cut a lot of our social spending to the bone. Look at Bush’s proposed $3T budget - over $400B in deficit, and massive domestic cuts.
So that pretty much gets down to defense and medicare (cutting social security might make ideological sense to some people, but it doesn’t seem to make much fiscal sense). On the one hand, have we really reaching the point where middle and upper class earners can’t suck it in for a few percent to pay for national defense? My dad fought in WWII, and my worked in a factory and lived with rationing - and they were coming out of the depression.
On the flip side, with the inflation rate of health care, I’m not sure if the middle class could handle massive cuts in medicare. Most spending on medical care occurs in the last 5-10 years of life and I can see Grandma and Grandpa really wiping out a lot of middle class families.
Also, I would worry about higher education. A lot of middle class families use tax deferred accounts to help put their kids through college. Even so, those kids come out with a surprising amount of debt.
And that just reminded me of stock purchases. Are those taxed at the VAT? That would seem to put a damper in 401K type retirement gains.
Again, I’m just asking. It just doesn’t look like that great a deal to me with so many middle income families with our current savings rates and high interest debt rates. Thank you for taking so much time in answering.
