It seems to me that sales tax is the fairest tax there is. In each transaction between consenting parties, all parties profit. A sales tax on such transaction will tax these parties. In such system there are no loopholes or tax exemptions. Its universal, and its fair. Yet I never heard someone support it. Any idea why not?
are you suggesting that this system is fair because consumers choose to gt taxed by buying items?
“The incidence of a general sales tax is exactly the same as the incidence of of a proportional income tax.” - Thomas McCaleb
There is a pretty significant movement for something called the “Fair Tax” which is supposed to replace all federal taxes with a national sales tax on retail purchases.
But like all taxes, it’s still theft, and it’s still economically destructive. You say that “In each transaction between consenting parties, all parties profit”, which is true, but a sales tax will cut down on the number of transactions that both parties find to be profitable. Whether or not it’s “fairer” than other taxes is a subjective judgement, but it might be easier to avoid paying than income taxes (since both parties have an incentive to transact on the black market rather than paying the tax), so I guess that’s a mark in its favor.
You answered your own question. Because with sales taxes the super rich would have to pay taxes too. See this post. The main purpose of taxes is to oppress the middle class so that the currently wealthy can stay on top. Sales taxes don’t serve that purpose.
Employment should also be treated as a sale. You sell your labor for money. So it would be taxed by my version of the sales tax. It is correct that it is easier to avoid than income tax, but it is universal. Its impossible to find loopholes. In income tax its very easy to find a loophole. For example you can make money out of lent money and you wil be exempt from tax. You can receive gifts, and you will be exempt. You can make money by selling stuff to people, and you will be exempt. You can’t get exemption from a tax on all transactions (my version of sales tax).
There is the proposal for a Universal Exchange Tax, levying a 0.1% tax on all transactions.
You didn’t prove, or at least explain, why it is fair.
You have never heard of the Fair Tax? That’s ironic on so many levels.
I did hear of the FairTax, but the UET (thanks Michael) is a lot better. Unlike FairTax which is too open to interpretation and manipulation, since “consumer” products cannot be easily defined, UET is more objective, more universal, leaves no loopholes, and it taxes profits which makes more sense.
Why does taxing profits make more sense?
Because as a society it is more morally acceptable to require more taxes from wealthier people. But how can you say who is wealthy and who is not? Consumption is not the best tool, because you can be wealthy and still not consume. However when all of the profit you have made until now is taxed, it means your entire wealth was taxed, and was taxed only once. That’s the best objective proof for wealth I know of.
Would gifts be taxed too? If not, then I just found a loophole in your scheme. I could sell a good at cost, thus, occuring no profit. Then the customer would simply gift me what would otherwise have been the profit. If gifts are taxed, then how is the profit calculated?
$1/person/year tax is “fairer” and even less amenable to loopholes: “You’re here? $1 please”.
It also doesn’t depend on keeping track of all transactions done by everyone which is an elaborate and spendy Big Brother endeavor in its own right.
Z.
Gifts will be taxed as well because you profit when you receive a gift. Gifts between family members and friends won’t be taxed though. Its not really a loophole, just a technical challenge. But we do know that VAT and sales tax already work in most of the western world, so its not that difficult to enforce UET as well.
You’ve created a loophole; who’s going to determine what is a friend? And why wouldn’t gifts between family and friends be taxed?
I myself tend to favor the sales tax v2.0: the VAT.
There are loopholes around it, believe me. Of course if you only shop at WalMart you won’t see them.
There are also some moral concerns (yes, even more). First of all you force retailers into becoming taxmen. Second: should all items belong to the same tax bracket? Not even European countries dared to tax milk and baby food as much as jewelry as much as they’d like it. Third: interest groups aren’t above using sales tax increases to get more money for themselves at everybody’s expenses. German industries got the subsidies and tax breaks they craved for by convincing the government to make up for its losses by increasing the sales tax from 16% to 19%. Is this fairer than any other form of taxation?
To start off, what do you mean by “as a society”? Please clarify.
It is true that forcing retailers act as taxmen is somewhat unfair, but they can be compensated by the state for that. But that’s just a technicality.
Gifts between family members won’t be taxed because technically it is impossible to track this.
I believe it should be illegal in the constitution to have special taxes for special groups, people or occupations. A single tax will make this more transparent and easier to enforce. If any special group demands a tax break, you’ll know immediately that something is fishy. It is much harder to find this fishiness in a system with 50 different tax types.
By society I mean people who live in your state and need money to pay for the army for example. If you tax everyone by the same amount, you won’t have enough money. So you have to tax the rich more. But how do you know who is rich? That’s easy. You just tax profits.
So you agree that your version of Sales tax does have loop holes…right
“In such a system there are no loopholes or tax exemptions.”
What’s wrong with loopholes and tax exemptions? They simply allow individuals to keep more of their own money. As Mises remarked “The very concept of ‘loopholes’ implies that the government rightly owns all of the money you earn, and that it becomes necessary to correct the slipup of the government’s not having gotten its hands on that money long since.”