[Osx-nutters] VAT vs Income Tax

[Chuck Bennett]

On Oct 25, 2006, at 2:15 PM, Google Kreme wrote:

> On 25 Oct 2006, at 10:43 , Matt Johnston wrote:
>> On 25 Oct 2006, at 17:10, Google Kreme wrote:
>>> A lot of people over here in the US are starting to clamor on  
>>> about replacing the IRS with a national sales tax.  Just to be  
>>> clear, this is simple another case of the rich trying to get  
>>> richer whilst the poor get poorer.
>>>
>>> For example, current sales taxes are about 8% nationwide.  Some  
>>> places are higher, some are lower, but 8% seems to be about the  
>>> average.  A VAT would probably be more in the area of 15% or so.
>>>
>>> This would effectively double the tax rate on the working poor  
>>> (who don't normally have much if any income tax to pay), while  
>>> drastically reducing the tax burden on the rich.
>>
>> Um...sure, the sales tax would be higher for everyone. So everyone  
>> pays more tax. Rich people buy more, therefore they would pay more  
>> tax...
>
> That's simply not how it works.  A rich person does not buy  
> anywhere near the same percentage of income as a poor person.  Your  
> average poor person is spending about %60 of their income buying  
> things, while a rich person is generally spending more like 30% of  
> their income buying things.
>
> Net result, twice as much tax burden on the poor.
>


There are ways around this.

from cato..

> First, the regressivity issue can be overcome easily. If we were to  
> provide a rebate on a generous portion of the tax that every  
> American pays, then the regressivity disappears. I advocate that  
> every individual receive a rebate on the tax paid on the first  
> $5,000 of purchases he makes during the year. This would mean that  
> a family of four would pay no tax on its first $20,000 of purchases  
> each year. There are various ways of providing this rebate.  
> Assuming that the sales tax were set at 18 percent, a family of  
> four would be entitled to a rebate of $3,600 ($20,000 x 18 percent)  
> for the year. The government could send a quarterly rebate check of  
> $900 to every family of four; a $450 check to every family of two;  
> and so on.
>
> Another possibility would be to provide every family with an annual  
> "smart card" that would have a sales tax credit based on family  
> size. A married couple with no kids would receive a $10,000 credit  
> on its card. Each time the couple made a purchase, the smart card  
> would deduct that amount until the card's $10,000 credit was used  
> up. After the first $10,000 of purchases, the family would begin to  
> pay the sales tax.
>
> Regardless of how the rebate is offered, the main point is that a  
> sales tax need not be regressive.

<http://www.cato.org/speeches/sp5-11-5.html>

=c=
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