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> Everything is taxed at 20%. You'd need to exclude resale of used items, unless it's your intent to kill the market for used goods and ensure that they end up

> Everything is taxed at 20%. You'd need to exclude resale of used items, unless it's your intent to kill the market for used goods and ensure that they end up straight in the trash. With a 20% sales tax on used items you might as well buy new instead, especially for durable goods which wouldn't trade at much of a discount. Apart from that change, what you're describing is essentially the "Fair Tax", except that they calculated that the rate would need to be more like 30% to remain revenue-neutral with the current income tax scheme.

nkurz 8y ago
With a 20% sales tax on used items you might as well buy new instead I don't see why this follows. For example, most states currently charge sales tax on the sales of used cars and there seems to be a thriving market for used cars. Do you believe that raising this rate from 5-10% to 20% would significantly impact the sales of used vehicles? especially for durable goods which wouldn't trade at much of a discount While I don't think it's a likely outcome, suppose that for some reason all buyers balked at paying a 20% tax. I think it's likely that this would cause sellers to reduce their asking price to clear the market. Why do you think sellers would throw the item in the trash rather than reducing the price?
- nybble41 8y ago
  > For example, most states currently charge sales tax on the sales of used cars and there seems to be a thriving market for used cars. Do you believe that raising this rate from 5-10% to 20% would significantly impact the sales of used vehicles? First, it would be raised by 20%, to 25-30%. Adding a federal sales taxes wouldn't negate the existing state taxes. Second, vehicles are a special case in the tax code. When you trade in a used vehicle you typically only pay the tax once, on the value of the new vehicle. (Technically, one tax on the trade-in value and another on whatever extra you paid for the new vehicle to make up the difference.) Under your scheme there would be a 20% federal tax on the value of the old vehicle plus another 20% federal tax on the value of the replacement. (Unless you don't intend to apply the sales tax to barter... with the predictable consequence that all significant transactions thereafter will avoid any actual exchange of currency.) More importantly, used cars tend to be much cheaper than new ones. There's some basis to that joke about losing half the value just driving the car off the lot. Even a 25-30% tax wouldn't make up for that much of a difference in price, though it would make used vehicle trades more expensive and probably put a damper on the market. Do you believe that imposing an extra cost of anywhere from hundreds to thousands of dollars in taxes on any used vehicle sale wouldn't significantly impact the sales of used vehicles? I think people would be more likely to buy their vehicles new, when they can afford it, and hold on to them longer. The ones that would be available used would consequently tend to be older and in worse condition, on average. > Why do you think sellers would throw the item in the trash rather than reducing the price? How much do you think they can reduce the price before it isn't worth the trouble? Finding a buyer is not necessarily an effortless process, and given that buyers aren't likely to want to pay more (incl. tax) than they do now the seller will have to lower their pre-tax price by at least 16% to make the sale. I already see perfectly good items sitting out on the curb with a "free" sign in less-than-ideal weather because they'd be too much trouble to sell; reducing the incentive to advertise and locate someone who values the item will only make that more prevalent. Besides, do you really want individuals collecting and remitting sales tax on behalf of the federal government? Sales of used items are much more likely to be person-to-person. Taxes on the sales of new items tend to be collected by registered businesses, which makes it a more manageable problem.

nkurz 8y ago

With a 20% sales tax on used items you might as well buy new instead I don't see why this follows. For example, most states currently charge sales tax on the sales of used cars and there seems to be a thriving market for used cars. Do you believe that raising this rate from 5-10% to 20% would significantly impact the sales of used vehicles? especially for durable goods which wouldn't trade at much of a discount While I don't think it's a likely outcome, suppose that for some reason all buyers balked at paying a 20% tax. I think it's likely that this would cause sellers to reduce their asking price to clear the market. Why do you think sellers would throw the item in the trash rather than reducing the price?

nybble41 8y ago
> For example, most states currently charge sales tax on the sales of used cars and there seems to be a thriving market for used cars. Do you believe that raising this rate from 5-10% to 20% would significantly impact the sales of used vehicles? First, it would be raised by 20%, to 25-30%. Adding a federal sales taxes wouldn't negate the existing state taxes. Second, vehicles are a special case in the tax code. When you trade in a used vehicle you typically only pay the tax once, on the value of the new vehicle. (Technically, one tax on the trade-in value and another on whatever extra you paid for the new vehicle to make up the difference.) Under your scheme there would be a 20% federal tax on the value of the old vehicle plus another 20% federal tax on the value of the replacement. (Unless you don't intend to apply the sales tax to barter... with the predictable consequence that all significant transactions thereafter will avoid any actual exchange of currency.) More importantly, used cars tend to be much cheaper than new ones. There's some basis to that joke about losing half the value just driving the car off the lot. Even a 25-30% tax wouldn't make up for that much of a difference in price, though it would make used vehicle trades more expensive and probably put a damper on the market. Do you believe that imposing an extra cost of anywhere from hundreds to thousands of dollars in taxes on any used vehicle sale wouldn't significantly impact the sales of used vehicles? I think people would be more likely to buy their vehicles new, when they can afford it, and hold on to them longer. The ones that would be available used would consequently tend to be older and in worse condition, on average. > Why do you think sellers would throw the item in the trash rather than reducing the price? How much do you think they can reduce the price before it isn't worth the trouble? Finding a buyer is not necessarily an effortless process, and given that buyers aren't likely to want to pay more (incl. tax) than they do now the seller will have to lower their pre-tax price by at least 16% to make the sale. I already see perfectly good items sitting out on the curb with a "free" sign in less-than-ideal weather because they'd be too much trouble to sell; reducing the incentive to advertise and locate someone who values the item will only make that more prevalent. Besides, do you really want individuals collecting and remitting sales tax on behalf of the federal government? Sales of used items are much more likely to be person-to-person. Taxes on the sales of new items tend to be collected by registered businesses, which makes it a more manageable problem.