Sales Taxes and "Helping the Poor"
---
A newcomer (probie?) on my blogroll, Economics with a Face, quoted, without much comment, a Bloomberg report on tax simplification and calls for replacing the federal income tax with a national sales tax (sorry, the link provided in the blog is not working):
I found this statement utterly bewildering. How exactly do you give the poor, or anyone else, an exemption from a sales tax?
You exempt products from a sales tax, not people. Is the point that “basic necessities” (i.e., what poor people spend their money on) will be exempt? If so, then you can’t simultaneously argue fairness for the poor and simplicity, since a sales tax peppered with exemptions meant to ease the tax burden on the poor will not be simple, it will be very complicated.
Look at any state that has less than a ubiquitous, prophylactic sales tax, and you find a complex web of lists, exemptions, schedules, etc., often the result of politics and lobbying more than common sense. For example, in my home state of New York: lemonade is exempt but root beer isn't, basketball shoes are exempt but bowling shoes aren't, frozen fried chicken is exempt but prepared fried chicken isn't.
Very difficult, and very political, decisions would have to be made were a federal sales tax to be implemented. Will pharmaceuticals be taxed? College textbooks? College tuition? Home purchases? Rent? Utilities? Orthodontics? Haircuts? Museum admissions? Funerals? And so on, and so on, and so on...
Not a road I’d like to see the federal government go down, given its track record with the Internal Revenue Code (currently at 2.8 million words and growing).
For Discussion: I'm always afraid to say "Open Thread," because if no one posts, then that imposes negative externalities on my ego, but I invite readers to contribute sales tax conundums from their home states -- examples of closely-related items where one is subject to sales tax and the other not.
POST SCRIPT: Let the record reflect that I have nothing whatsoever against the National Taxpayer Union. They seem to talk libertarian enough. I think the spokesman just flubbed in this particular instance.
UPDATE: Peter at Economics with a Face posts a thoughtful update addressing my concerns. I certainly have no problem with people engaging in the academic thought experiment of replacing the federal income tax with a sales tax, using efficiency and/or equity as the evaluating criteria. But let's call a duck a duck -- in the real world any proposal for a federal sales tax must be loudly and unequivocally opposed for the simple reason that
Or have I become just too cynical in my [not that] old age?
Related Post:
Denny's For Breakfast
(Cross-linked at Outside the Beltway.)
Under either a flat tax or sales tax, the poor would be given an exemption "that recognizes the right of a family to provide for itself before it provides for the government," said Pete Sepp, vice president for communication at the National Taxpayers Union, a non-partisan advocacy group in Washington.
I found this statement utterly bewildering. How exactly do you give the poor, or anyone else, an exemption from a sales tax?
You exempt products from a sales tax, not people. Is the point that “basic necessities” (i.e., what poor people spend their money on) will be exempt? If so, then you can’t simultaneously argue fairness for the poor and simplicity, since a sales tax peppered with exemptions meant to ease the tax burden on the poor will not be simple, it will be very complicated.
Look at any state that has less than a ubiquitous, prophylactic sales tax, and you find a complex web of lists, exemptions, schedules, etc., often the result of politics and lobbying more than common sense. For example, in my home state of New York: lemonade is exempt but root beer isn't, basketball shoes are exempt but bowling shoes aren't, frozen fried chicken is exempt but prepared fried chicken isn't.
Very difficult, and very political, decisions would have to be made were a federal sales tax to be implemented. Will pharmaceuticals be taxed? College textbooks? College tuition? Home purchases? Rent? Utilities? Orthodontics? Haircuts? Museum admissions? Funerals? And so on, and so on, and so on...
Not a road I’d like to see the federal government go down, given its track record with the Internal Revenue Code (currently at 2.8 million words and growing).
For Discussion: I'm always afraid to say "Open Thread," because if no one posts, then that imposes negative externalities on my ego, but I invite readers to contribute sales tax conundums from their home states -- examples of closely-related items where one is subject to sales tax and the other not.
POST SCRIPT: Let the record reflect that I have nothing whatsoever against the National Taxpayer Union. They seem to talk libertarian enough. I think the spokesman just flubbed in this particular instance.
UPDATE: Peter at Economics with a Face posts a thoughtful update addressing my concerns. I certainly have no problem with people engaging in the academic thought experiment of replacing the federal income tax with a sales tax, using efficiency and/or equity as the evaluating criteria. But let's call a duck a duck -- in the real world any proposal for a federal sales tax must be loudly and unequivocally opposed for the simple reason that
income tax today + sales tax tomorrow = both taxes next week
Or have I become just too cynical in my [not that] old age?
Related Post:
Denny's For Breakfast
(Cross-linked at Outside the Beltway.)
Posted by KipEsquire on
18 November 2004
To comment on this post, please visit the new blogsite.
