Comments on: Bush may propose a sales tax in second term.

by: Alan T.

Fri, 25 Apr 2003 11:49:53 +0000

Do you have some evidence that a sales tax would need to be that high? I had in mind including not just retail sales but sales of homes, interbusiness transactions, etc.

by: http://www.meki.tk/

Wed, 16 Apr 2003 11:39:37 +0000

very good webste

by: natasha

Tue, 15 Apr 2003 09:01:26 +0000

That’s very interesting, although the last I heard, such a tax would have to be 50% of *every* purchase in order to replace income tax. No exceptions. Doubling that would mean an instantaneous doubling of all consumer prices.

At the onset, the most vulnerable members of society would immediately see their checks inflated away, and many would probably go bankrupt before the first year’s refund reached them. Initially, wages would probably drop in response to decreased sales of many items, and it would set off a serious shock of unemployment. Wages would rise again eventually, but it would take quite a while for demand to resume its former levels.

Just because an idea sounds ‘intellectually pure’ doesn’t mean it would work. The institution of the income tax coincides, not by accident, with the rise of a large middle class in this country. Any fuel on that fire is just an invitation to reverse almost 80 years of largely beneficial social engineering.

by: Alan

Tue, 15 Apr 2003 00:23:06 +0000

Thanks! To my knowledge, no one else has ever proposed something like this–but my knowledge is far from all-encompassing. Still, if someone else has proposed this, it hasn’t been circulated widely. And this is the first time I’ve described the idea online, though I’ve been mulling it for about a year. (So to whomever’s reading, please credit me and my blog if you mention this to others, if you would.)

And you’re right–it doesn’t have to be double. Make it a LOT less than double, though, and it starts getting close to "flat" which in the case of consumption tax is regressive.

You could also get into issues of whether things like groceries or clothing would be exempt…but I’d rather keep it simple if I were in charge.

by: Andrew Hagen

Mon, 14 Apr 2003 23:34:15 +0000

That's interesting. It sounds like a negative income tax, except that it would be more like a negative consumption tax. I'd like to see that explored.

Note that taking double the amount of average consumption tax paid is not absolutely necessary. It could be more or less than double, and the effect would be similar.

Great idea.