Why reliance on consumption taxes is a really stupid idea

Don't expect the honorables in Raleigh to back off of their ill-conceived plan to drop income taxes in favor of consumption (sales) taxes. It's hard enough collecting the former, and quite nearly impossible to collect the latter. And it's not just my opinion.

That's why I want to see more reliance on a progressive, graduated income tax that covers salaries, bonuses, capital gains, and dividends equally. This is one of the central planks in my platform.

Be sure to read the article. It's a good one.


As if...

...things weren't bad enough here in Rutherford County as it is, being a border county with SC, a consumption tax will drive even more folks to go across the line to do their shopping.


I would like to see sales taxes eliminated except on certain categories where the state incurs costs associated with such sales. Haven't thought it all the way through, but things like

gasoline / diesel

Otherwise, let people buy what they want at the price offered ... and get retailers and businesses out of the middle when it comes to collecting taxes.

A tax on poor and low income?

The New Yorker has an interesting piece about the "underground economy" - income that's not reported to the government and isn't taxed. One researcher that's looked at this segment of the economy sees it growing dramatically.

What seems to be happening is that people who lost full-time work or can't find a full-time job after college are doing more short-term "odd jobs" off the books - everything from landscaping or groundskeeping to home repairs to web design work.

One might say increased sales taxes would be the way to tax this "underground" economy. However, these people aren't getting rich working "off the books" and it will just force them to spend less.

This would probably hit many of NC's rural counties pretty hard - if you do digging at the census bureau looking at different NC counties, the population of many rural counties is older and retired or heading in that direction over the next decade and the younger people left there have a higher chance of being unemployed and receiving public assistance.

I did some additonal digging

and concluded lots of experts think the sales tax side is much harder to manage (because of the underground economy, the grey and black markets, etc.) than the income tax side. That's why I favor taxing income (ALL income, including capital gains, dividends, etc.) instead of consumption.

It's going to get worse before it gets better, and the Republican answer at every turn is to bury their heads, shrink government, and cross their fingers. Their austerity fetish is ruining the entire global economy, and they seem oblivious to the toxic impacts of their actions.

I'm not sure completely doing away with sales tax is a good idea

but I haven't studied it. Nor do I think treating all dividends and capital gains as ordinary income is realistic.

What I do think is the current system works, but it's warped. If we did something to cause everyone to submit a tax form regardless of income we could establish, yearly, the median income (MI) in NC. That figure should be the starting point for a lot of tax calculations. Example: Assume last years MI for NC was $45K. This year you had an AGI of $80K including 15K of Capital Gains (CG). This year your CG would be taxed at CG rates because it's less than the MI. Now assume you had an AGI of $220K of which $120K was CG. Your first 45K (the MI) of CG would be taxed at CG rates, the rest as ordinary income. The idea is that as the MI goes up the coupon clippers get to keep more of their CG's but the little guy isn't hurt by taxing ALL CG's as ordinary income. As the boat rises we're all in it sorta thing. Win-win.

Of course, deductions need to be leveled out. Make interest paid on any car loan where the car price is $30K or less deductible...after the $30K loan level...no , you pay the difference . Morgage Interest deductible up to /including payments made on amounts of less than 2.5X the median home price. ETC.... The idea is that everyone gets the same breaks up to a certain point and after that the tax applies equally to all who exceed that level... Eliminate sales taxes on groceries...prescription drugs...single clothing purchase transactions of up to $600. That means a $3000 Armani suit gets taxed, but 5 pair of jeans and some shirts and underwear don't. There's more, but the idea again is that the poor and miidle class and wealthy all get the same treatment...to a point. And the better the poor and middle class do, the better the already wealthy become. Just my simple thoughts...

Stan Bozarth

You're describing a progressive, graduated income tax

which is what I support.

My specific question: Why not treat all income the same? Why should dividends, interest, and capital gains be taxed at a lower rate than salaries and wages?


On sales taxes ... I have storm brewing in the back of my mind. As you know, I am against corporate personhood. I don't believe that companies should have the same rights as people. But I also don't believe that companies should be forced to do a lot of things that are the proper business of government. Collecting taxes, for example. Putting the burden on business to report what they pay people is a significant one and I don't see any way around it. But adding in the additional burden of collecting taxes from people (sales taxes) has always struck me as a step too far. If we could avoid it, would we really want businesses, small and large, having the responsibility for tax collections and payments?

The interference of government in business - and of business in government - has grown to an epidemic stage. I want to draw a bright line that keeps them separate, just as I want a bright line between religion (which is also big business in America) and government.

To my knowledge Interest IS taxed as ordinary income. As to

the rest, I think it is a reasonable compromise to allow investors (who do take some risks) to be rewarded for their efforts. And, anyone with a 401K is getting some of that type income. And people who sell their homes. The current tax rate/breaks are unfair for the ultra rich because (according to a USC study of some time past) they typically earn 50% or more from capital gains. So, I am simply advocating for some threshhold before the reduced tax is phased out so moderate income people won't be disproportionately penalized.

Congress has made our tax code so complex that most people don't understand it, and each state has it's own wrinkles. I pay taxes in two states. The differences are startling.

I think people ought to think about, as you're doing, essentially forgetting what we have and the special interests, and design a code that is reasonable for all...including those who do not get a w-2 but still earn money. I think the concept of using an anually calculated median income to establish/rate some taxes is a reasonable way to ensure we all rise when the boat floats. Some deductions need to remain, but they need to be phased out/reduced beyond reasonable limits. No mortgage interest deductions for second homes until we have no homeless is an exaggeration, but it's the concept. A strong and thriving middle class and a dramatic reduction in poverty is the way this nation will once again prosper. And everyone would be able to help pay the bills required by a civilized society.

Stan Bozarth

First Do No Harm

That should be the prescription for anyone in power. Republicans really believe government doesn't work and they are set out to prove it by breaking things right and left. If they really cared about governing they would take it slow, not come in swinging with a sledge hammer. One stupid proposal at a time please!

That would be a great oath for them to take

but I fear they are genetically programmed for destruction and aggression. That's the nature of far too many capitalist greeders. Take what you can, the rest be damned.

Heartily Agree...

Good comment.

Stan Bozarth