4 ms·

Is this a correct summary? A national sales tax of 1%, no income tax, and 7 years to pay the debt?

• lucasjung 16y ago
  My understanding is that this is far more than just a sales tax: it is a 1% tax on ALL financial transactions. Other proposed sales taxes to replace the income tax, such as the fair tax, generally only apply to retail sales of new consumer goods. This would go way beyond that. Write a check to your nephew for his birthday? 1% tax. Buy something used on eBay and pay for it on paypal? 1% tax. Support a project on Kickstarter? 1% tax. Get paid by your employer? They pay a 1% tax. Sell some shares of stock A in order to buy stock B? 1% tax on the sale and another 1% tax on the purchase. This one is HUGE: consider how many such transactions occur on Wall Street each day. Such a tax alone could quite likely destroy the high-speed trading industry. I'll let smarter people decide whether that's good or bad. Also consider that all of these cascade. For example: you buy a table and pay a 1% transaction fee. The store paid a 1% transaction fee when they bought the table from the manufacturer, a 1% transaction fee on the shippers who brought it to the store, and a 1% transaction fee on their rent, utilities, and other overhead. The manufacturer paid a 1% transaction fee on their raw materials, 1% to have those materials shipped, etc. I would imagine that this would strongly encourage vertical consolidation in order to avoid these intermediate transaction fees. Again, I'll let the economists figure out how good/bad that is.
  • tptacek 16y ago
    Take the words "high-speed" out of that sentence and it will probably be more accurate.
• metageek 16y ago
  The "no income tax" part doesn't kick in until 2017. Note that the CRS summary says that the bill states that paying off the debt in 7 years is the bill's purpose. The CRS does not assert that it will work. I suppose it might work, but I can point to one flaw right now: it cancels the income tax in 2017, not "when the debt is paid off".
  • DougWebb 16y ago
    Seven years is plenty of time for congress to alter that part, and keep both taxes in place. Their justification would probably be to fund the IOU's for all of the money that was borrowed from the "pay off the debt" fund during the first seven years.
    • metageek 16y ago
      The time to fix it is before it's passed, not after.
      • DougWebb 16y ago
        You're clearly not a politician. - Politician A gets to pass broken legislation now and get credit for "Fixing the Status Quo". - Years later, Politician B gets to fix the broken legislation and get credit for "Fixing the Status Quo". Of course, this fix is even more broken than the original. - For extra credit, Politician A and B are the same person, but none of the voters remember that he's been responsible for the mess all along.
• roc 16y ago
  Trivially, no. The bill isn't exactly clear on my reading. But it's certainly not proposing the equivalent to a 'sales' tax. It would be a 1% tax on all sales, investments, trades, possibly even payments on outstanding debts or even transfers from one account to another owned by the same person. Again, the full extent isn't quite clear to me, but it's definitely far more broad than a traditional 'sales' tax or VAT. And frankly, that's the only way you could gather those amounts.