Dry Clean Your Dog Recently?
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One of the reasons I dismiss calls for replacing the federal income tax with a federal sales tax is because such proposals are founded on several false premises. See my previous post.
Among the most glaring of these faulty assumptions is that the Politics of Pull and the Politics of the Warm Fuzzy Feeling wouldn't permeate a federal sales tax the exact same way they infect state sales taxes.
Who seriously believes that federal politicians and bureaucrats would, for example, allow diapers to be taxed? Or college tuition? Or an appendectomy? Or the interest on your mortgage (your bank "sold you" financial services, so -- I am not making this up -- the sales price, which is the interest you pay the bank, would get "sales taxed" as well, at least under one proposal).
In New York State, soda (even diet soda) is taxed but iced tea isn't. Frozen chicken is not taxed but heated chicken is. Basketball shoes are not taxed but golf shoes are. And so on.
So the IRS would not "disappear" under a federal sales tax -- it would continue to do exactly what it does today: issue regulations and interpretations. Much like state finance departments do when implementing and enforcing their sales taxes.
One example: the brainiacs in Tennessee:
I'm sure that Congress and the IRS would do a far better job with a federal sales tax. Just look at their exemplary track record with the Internal Revenue Code -- all 16,485 pages of it.
It's quite simple really: Take care of tax rates, and tax simplification will take care of itself.
(Via Tax Policy Blog.)
Among the most glaring of these faulty assumptions is that the Politics of Pull and the Politics of the Warm Fuzzy Feeling wouldn't permeate a federal sales tax the exact same way they infect state sales taxes.
Who seriously believes that federal politicians and bureaucrats would, for example, allow diapers to be taxed? Or college tuition? Or an appendectomy? Or the interest on your mortgage (your bank "sold you" financial services, so -- I am not making this up -- the sales price, which is the interest you pay the bank, would get "sales taxed" as well, at least under one proposal).
In New York State, soda (even diet soda) is taxed but iced tea isn't. Frozen chicken is not taxed but heated chicken is. Basketball shoes are not taxed but golf shoes are. And so on.
So the IRS would not "disappear" under a federal sales tax -- it would continue to do exactly what it does today: issue regulations and interpretations. Much like state finance departments do when implementing and enforcing their sales taxes.
One example: the brainiacs in Tennessee:
Laundering or dry cleaning of tangible personal property is a taxable service in Tennessee. Thus, charges for bathing animals are subject to sales tax while charges for grooming are not taxable.Are you getting all this down?
Persons providing animal grooming services who have been making a single charge that includes both the bathing and grooming of an animal have two options:Don't worry -- there's only 39 more pages of such minutiae that the Tennessee government expects people -- not accountants, not business owners, but everybody -- to know and abide by.
--Separately itemize the charge for bathing from grooming and apply sales tax to the charge for the bathing portion of the invoice, or
--Continue to make a single charge for both bathing and grooming, and apply tax to the total charge on the invoice.
I'm sure that Congress and the IRS would do a far better job with a federal sales tax. Just look at their exemplary track record with the Internal Revenue Code -- all 16,485 pages of it.
It's quite simple really: Take care of tax rates, and tax simplification will take care of itself.
(Via Tax Policy Blog.)
Posted by Kip on
21 August 2007
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