How would a National Consumption Tax be better than an Income Tax?

SFC Kathy Pepper — Tue, 10 Jan 2023 16:14:39 -0500

Lower income people currently have certain tax breaks to alleviate their financial burden. However, lower income people spend a larger percentage of their income on necessities, so their tax rate would effectively increase.

In order to save on taxes, most people are likely to save more of their money, which is good but it would mean less in taxes to support the government. State and local governments rely on Federal money to pay for infrastructure, so would need to raise taxes. This happens whenever the Federal government cuts taxes so it’s not really a tax cut, it’s a tax shift.

https://www.msn.com/en-us/news/politics/house-republicans-to-vote-on-bill-abolishing-irs-eliminating-income-tax/ar-AA16aGqW?ocid=msedgntp&cvid=6edf4a56f84346249ac3559778f6cb20

MSN

Response by MSG Private RallyPoint Member made Jan 10 at 2023 4:42 PM

MSG Private RallyPoint Member — Tue, 10 Jan 2023 16:42:18 -0500

I think a national tax is a good thing because everybody will have to pull their weight. Moreover, middle American small business will thrive due to less red tape which will enhance wages and innovation. Maybe I'm off base here but I don't think it's right for people to get huge credits while others have to pay more simply because of their hard earned wage totals.

Response by Maj Kevin "Mac" McLaughlin made Jan 10 at 2023 5:08 PM

Maj Kevin "Mac" McLaughlin — Tue, 10 Jan 2023 17:08:06 -0500

Flat consumption tax places the burden equally on all. Also, most of the consumption tax plans I understand eliminate basics such as food and clothing from the tax. This easing the burden on those who cannot afford such changes. But ultimately every single American should feel the effect when our politicians increase or decrease taxes.

Response by LTC Private RallyPoint Member made Jan 10 at 2023 5:23 PM

LTC Private RallyPoint Member — Tue, 10 Jan 2023 17:23:45 -0500

If this is the "Fair Tax" bill I think it is, it includes a "prebate" that gives every person a check to cover the tax for spending up to the poverty level. Meaning the poor pay absolutely no tax.

Response by MAJ Ken Landgren made Jan 10 at 2023 5:54 PM

MAJ Ken Landgren — Tue, 10 Jan 2023 17:54:02 -0500

National consumption tax tends to hurt the poor the most.

Response by Maj Kevin "Mac" McLaughlin made Jan 10 at 2023 6:48 PM

Maj Kevin "Mac" McLaughlin — Tue, 10 Jan 2023 18:48:46 -0500

For more info on the National Sales Tax. Another good point to add beyond the link is that not just Americans pay into it. Immigrants, tourists, illegal immigrants even all support the system.

https://www.forbes.com/sites/davidmarotta/2013/02/11/is-a-national-sales-tax-really-fair/?sh=528b260a1790

Is a National Sales Tax Really Fair?

A progressive income tax threatens our liberty and prosperity. It punishes the productive by taxing them the highest amounts, reduces employment by increasing the cost of employees and reveals our personal finances and thus invades our privacy. A popular suggestion is to eliminate the income tax and replace it with a [...]

Response by Cpl Vic Burk made Jan 10 at 2023 6:53 PM

Cpl Vic Burk — Tue, 10 Jan 2023 18:53:09 -0500

SFC Kathy Pepper My question, Is this a new tax or will the feds reduce the federal income tax? If it's a new tax the poor and working class will get clobbered and will reduce their standard of living while the rich will fell little. Isn't it enough that in Tennessee we already pay 9.75% sales tax (7% on food)? How much more can American's afford to be taxed?

Response by MSgt Steven Holt, NRP, CCEMT-P made Jan 11 at 2023 4:47 AM

MSgt Steven Holt, NRP, CCEMT-P — Wed, 11 Jan 2023 04:47:09 -0500

I don't really like ANY tax but the Fair Tax proposals have the most appeal for me. It's been a while since I read the book but I believe there were exemptions for "necessity" items such as food, clothing, etc. Plus, plans like the Fair Tax et al would have more people paying into the system (such as foreign tourists, illegal immigrants, etc) instead of just "wage earners". No plan is perfect but I don't see our current "tax and spend" construct being sustainable for the long term. At least the Fair Tax proposal would eliminate the Fed's ability to arbitrarily increase taxes to pay for the next flashy pork-barrel project that comes along.

Response by CPT Lawrence Cable made Jan 11 at 2023 5:58 AM

CPT Lawrence Cable — Wed, 11 Jan 2023 05:58:53 -0500

Actually, infrastructure for roads and bridges are paid with fuel taxes. Wildlife Management Areas are paid for by a self imposed tax on hunting and fishing gear, or licenses fees at state level. There are other ways to pay for government services and this country survived for over one hundred years without one.

Response by CSM Darieus ZaGara made Jan 11 at 2023 6:06 AM

CSM Darieus ZaGara — Wed, 11 Jan 2023 06:06:37 -0500

It is made to sound so simple from either perspective. There are wholes on either side. However there seems to be enough value that it be evaluated from all sides. Big money always finds a way out, close those loopholes and I’m in.

Response by SSG Roger Ayscue made Jan 11 at 2023 10:45 PM

SSG Roger Ayscue — Wed, 11 Jan 2023 22:45:04 -0500

I say a flat tax of 10%, No deductions, no returns, no exceptions. From that 10% the Federal, State and Local governments have to meet their budgets. No tax on food and no taxes on homes, vehicles or land. Once you own it you should not have to pay the state rent to use it.
Legalize cannabis and tax it like tobacco and alcohol. Tax the ever loving piss out of it.

Everyone pays. Rich and poor, the same amount as a percentage of income, and everyone has skin in the game.
NO Child credits, First because your choice to have kids should not affect my taxes and Secondly, you should NEVER get back more than you paid in. If you get back more than you paid in that is receiving Stolen Property.

Response by PO2 Lawrence Moody made Feb 3 at 2023 5:27 PM

PO2 Lawrence Moody — Fri, 03 Feb 2023 17:27:32 -0500

Be careful what you wish for..

Response by Lt Col Jim Coe made Feb 3 at 2023 6:22 PM

Lt Col Jim Coe — Fri, 03 Feb 2023 18:22:29 -0500

I’m all for tax plans that simplify the tax code and make sure everybody has some “skin in the game.” If income tax is simplified and flattened at the same time I’m definitely for it. Then add a National sales tax. Some version of Herman Cain’ 9-9-9 plan still looks good to me. A postcard individual tax return would be a great improvement. No deductions, no breaks for special interest groups. Effectively just put down all the money you received, multiple by 0.09, send that amount to the IRS. The sales tax computation and collection process exists in most places to support state taxes. Those systems could be enhanced to collect a nationwide sales tax. Maybe exempt food and prescription drugs. Couple that with a Balanced Budget Amendment and line item veto and the Federal Government might be on the way to fiscal responsibility

Response by SPC John Goethe made Feb 3 at 2023 11:45 PM

SPC John Goethe — Fri, 03 Feb 2023 23:45:49 -0500

The Flat Tax idea is fine except for those of us who are spending money that we've already paid tax on prior to our retirement. When we spend our savings, it would be taxed a second time, which is totally unfair!

Say "NO!" to the Flat Tax unless retirees are exempt.

Response by SMSgt Bob Wilson made Feb 4 at 2023 12:41 PM

SMSgt Bob Wilson — Sat, 04 Feb 2023 12:41:39 -0500

We have a consumption tax; it is called SALES TAX. To answer your question for low income people, every state now adjusted the sales tax to necessities. Example: I believe in Washington State all non-prepared foods [ie, uncooked] and medications are exempt. I believe in Tennessee, "necessities" [ie, food] is taxed at 5%; however, the state sales tax is 7%. In both states, the local municipality can add a "local sales tax". Let us take Germany for example. The consumption tax is 19%. On top of that is an income tax. It is rather high in areas and low in other areas. It has been converted to US Dollars.
Germany Residents Income Tax Tables in 2022
Tax Rate Taxable Income Thesholds
0% - 9,244.44
14-18% 9,245.37 54,589.81
18-35% 54,590.74 257,245.37
36-42% 257,246.30 and above

The problem in the States is how to fund the local government [ie, cities and counties]. For the US to obtain a "one tax" system, the tax rates would need to be in the area of 47% of your income and that does not include property taxes. Included are Federal Income Tax (24%), State Income Tax (13%) and Sales Tax (10%).

Response by LCpl Jeff Moore made Feb 4 at 2023 12:49 PM

LCpl Jeff Moore — Sat, 04 Feb 2023 12:49:12 -0500

For the rich they pay less, the current system means you pay a sale tax on buying a home, or rent.

So someone making 60k that spend 95% of their paycheck will pay the same as someone that makes 120k and spend only half.

Response by PO1 Mark Floyd made Feb 5 at 2023 11:36 AM

PO1 Mark Floyd — Sun, 05 Feb 2023 11:36:59 -0500

In a word.....NO it would not be "better". Also disproportionately affected are those on fixed income. All Americans are currently suffering under high inflation and the Republicans want to thrown a 23% tax on top of what folks are already paying? So they say folks will get a "prebate" up to the poverty level which for 2022 is $18,310 for 2. A couple already have a standard deduction for 2022 of $25,900 on their Federal income Tax. So explain how that is good for lower income and fixed income folks. Also they want the States to administer the tax and send the funds to the Treasury. Just another bad idea unfunded mandate from Washington DC. There is NO REVENUE ISSUE. The Federal Government is collecting record taxes. There is a SPENDING problem ONLY.

Response by CW5 Mark Smith made Feb 5 at 2023 1:11 PM

CW5 Mark Smith — Sun, 05 Feb 2023 13:11:08 -0500

Oh that I were rich, but hence I'm not! But I never thought the "progressive" income tax was fair. Either a flat rate income tax or the suggested national consumption tax would be fair to all.

Response by PVT Mark Whitcomb made Feb 6 at 2023 12:21 AM

PVT Mark Whitcomb — Mon, 06 Feb 2023 00:21:01 -0500

Although I do not know how much the Gov. needs to keep operating. I would be for a consumption tax if they had the right protections in place. First of all I like the fact that consumption tax makes everyone pay, those off the books, the illegals who want a better life, drug dealers etc. The rich would pay their fair share as they buy more. The IRS would be regulated to collecting taxes from businesses who collect the taxes and processing returns from the low income families who would get a return because of their income. The government would have to set income limits so low income families get relief. This gets rid of all the loop holes that some of wealth take advantage of. Especially those in power who make the tax laws which seems to benefit them the most.

Response by PO2 Patrick Dwyer made Feb 6 at 2023 12:30 AM

PO2 Patrick Dwyer — Mon, 06 Feb 2023 00:30:35 -0500

Hopefully, the national tax includes taxing the value of active duty housing, Subsistence, Hazardous duty pay and other compensation received . BAQ, BAS, Moving expenses, Sub Pay, Sea Pay, Special Duty Assignment pay, etc is where I made my money.... Tax it all, but do not touch US Congress housing, travel, per diem or any other compensation. Definitely tax all Military retirement pay, including Disability, any and all Medical cost covered by VA or other medical practice. Isreal, Afghanistan and Pakistan needs this money, so since the military makes their money off war.... Tax every penny spent. Maybe we could invade Detroit, West Virginia and bulid roads, schools, etc. But, don't tax Congress since as Millionaires they earned their money honestly(No killing or bombing by them) and work a helluva lot harder than you have to keep their incomes.....

Response by PVT Mark Whitcomb made Feb 6 at 2023 1:18 AM

PVT Mark Whitcomb — Mon, 06 Feb 2023 01:18:49 -0500

On another topic I believe income tax is just wrong. You should not be taxed for you labor. I understand business taxes as they make tons of money off of consumers. Consumption tax seems to be more of an even field. Lets face it those that make more spend more. People complain about corporations making billions a year. Well first off they spend billions to make those billions. With a consumption tax the billions they spend would generate taxes. Under our current system they get tax breaks. I'm sure the people in congress know this as they are funded by these corps. The tax laws they make help them and the corps. I wonder if anyone looks to see how much stock these elected officials get from these corps. It seems to be a rigged game to me and to be honest it's not a game i want to play.

Response by PVT Mark Whitcomb made Feb 6 at 2023 11:05 AM

PVT Mark Whitcomb — Mon, 06 Feb 2023 11:05:58 -0500

The states that have no income tax seem to be doing much better than those that do. they are funded through sales taxes (consumption)

Response by CW2 Private RallyPoint Member made Feb 6 at 2023 12:41 PM

CW2 Private RallyPoint Member — Mon, 06 Feb 2023 12:41:54 -0500

Do the Math! I'll give an example: German VAT rates.
In addition to the EU Tax Rate, the standard VAT rate in Germany is 19%. There is a reduced rate of 7% for food, books, hotel accommodation, cultural services and other goods and services. So, let's take a look at applying this model to the USA: A National Tax rate say 19% to start + State: 8% + County: 4% + the City: 4% = 35%. Then we have to look at all of the so-called Non-Tax Government mandated fees for instance: My Jan 2023 Water bill, the actual cost of water used was $9.02 but add those Non-Tax fees and I paid a whopping $100.78. See where this is going give politicians access to an additional source to spend foolishly and just like our current Income tax... They managed to get us into $33 trillion of debt!

Response by PO1 Janice Ritz made Feb 7 at 2023 11:03 AM

PO1 Janice Ritz — Tue, 07 Feb 2023 11:03:08 -0500

So many people do not understand that the poor, disabled, and elderly pay the highest amount of their incomes on taxes. Yes, they may get "relief" once a year when they file for tax "rebates." However, many do not file because they do not have enough income or their income is non-taxable to begin with (like compensated veterans). Therefore, having a consumption tax keeps most of the burden on those who can least afford to pay taxes. A wealth tax on assets for those who do not currently pay income taxes b/c they only make money through investments is a better way to tax the rich. Stop trickle down economics. It has never worked. The only thing that flows down hill is mud and $hit.

Response by GySgt Troy Wiltshire made Feb 8 at 2023 10:35 AM

GySgt Troy Wiltshire — Wed, 08 Feb 2023 10:35:43 -0500

It would be awesome, because then everyone would pay taxes no matter if they were rich or poor citizen or not. Everyone pays unless they don’t buy anything in the United States, but as long as they buy something they pay taxes. Then we could get rid of the IRS and the pain of filing taxes.

Response by PVT Mark Whitcomb made Feb 8 at 2023 8:00 PM

PVT Mark Whitcomb — Wed, 08 Feb 2023 20:00:01 -0500

I have to admit there are many arguments about this debate. The truth as I see it is that under the current tax system the top 1% earners pay 90% of the taxes. Those that work under the table, or people who make money illegally by selling drugs etc. pay nothing. A national sales tax would make everyone pay regardless of status. The IRS would be relegated to collecting taxes from businesses who collect the "Federal sales tax". Tax returns would be for those who, the government figures, below the standard of living depending on Income and dependents. Blaming business and others for paying their fair share is all a smokescreen. The politicians say look at this company who made a profit of 1 billion. They never tell you they invested 100 billion to make that money. If you invested 50k of your money and got 500 back would you think the same?? It is just numbers and politicians use these numbers to make feel like they have an answer. The only thing I see is middle income politicians getting elected to congress and walking away millionaires.

Response by PO3 David Mabo made Feb 9 at 2023 2:32 PM

PO3 David Mabo — Thu, 09 Feb 2023 14:32:18 -0500

I spend a small fraction of my income now, unlike my time in service or many of the years in between. A sales tax would only tax a small amount of my income, and thinking of my ex-boss about 1% of his income. A graduated income tax is much fairer than a sales tax or consumption tax.

Response by MAJ Joseph James made Feb 9 at 2023 3:44 PM

MAJ Joseph James — Thu, 09 Feb 2023 15:44:39 -0500

There was a book written a few years ago called Fair Tax. Here's a link to an explanation of fair/flat tax. https://fairtax.org/about/how-fairtax-works It spelled out the benefits of a flat tax which is only levied at the final sale. he tax would also only be assessed on new products. Meaning there isn't taxes for each product that goes into a manufacturing product. So you buy a new car, there a flat tax, you buy a used car, there is no tax. Each "tax-payer" would get a government debit card loaded with an amount "believed" to be the taxes on everyday items (food) so it would off-set lower income people for their taxes for purchases. In the book, at that time, they said we could payoff the national debt and actually have money left over.

how-fairtax-works

Response by SFC Steven Wheeler made Mar 2 at 2023 8:27 AM

SFC Steven Wheeler — Thu, 02 Mar 2023 08:27:33 -0500

For me it really depends on what that national consumption tax rate ends up being, and what loops holes are in place. If it is 30%, would that be worth it??? Imaging spending another $10K plus on a modest new or used vehicle??? I think this really could hurt the economy if people stopped making major purchases, not just cars but home appliances, electronics, etc.

Response by SFC Jerald Bottcher made Mar 12 at 2023 1:04 AM

SFC Jerald Bottcher — Sun, 12 Mar 2023 01:04:23 -0500

I disagree with a national flat tax (or as the Europeans call it the Value Added Tax - VAT. On paper it sounds like it is equitable, however in reality it is not. The poorer people spend everything they have just to survive. Those who do not have to spend everything can save it and then only pay when they buy something. Well there are plenty of rich people who would spend their money elsewhere and avoid paying tax at all.
Now in most states we already have sales tax (which is a flat tax) and most of these states also have income taxes as the sales tax does not generate enough income to support the state and local government. Now if that flat tax were to also money spent purchasing stocks and binds, then that may work.
That said the current income tax system does not work well. The rich get out of paying their fair share as a percentage of their income. I would much rather prefer a national flat income tax where everyone pays as a percentage of their income. no deductions, and count all of the income they receive to include stocks and dividends given as a form of compensation. And stop all these tax breaks for big oil and other companies that are making money hand over fist, but still get handout from the governments