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Economy Fiscally fit?

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  #1  
Old October 12th, 2010, 02:52 PM
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Income Tax or Sales Tax

Don't know whether this has been discussed before... but if it has then don't freak out, Preimy pai... chill... put some ice on it

Some politicians are suggesting that sales tax will be a better option than income tax. Being a financial ignoramus, I was wondering from the layman's pov as to which one would be more convenient and I am leaning more and more on sales tax... as long as they do not take all your purchase cost towards sales tax. I mean, you go to buy bread and suddenly it costs 12 bucks a packet whereas before it was 3 bucks... the remaining 9 going towards sales tax.

So, if they assure that they keep sales tax reasonable then would that be advantageous than income tax What other loopholes are there? Maybe online purchases... people would do more online purchasing and avoid sales tax completely... effectively paying no taxes.

Any thoughts... o financial gurus?
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Old October 12th, 2010, 03:03 PM
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Re: Income Tax or Sales Tax

Quote:
Originally Posted by Sane Less View Post
Don't know whether this has been discussed before... but if it has then don't freak out, Preimy pai... chill... put some ice on it

Some politicians are suggesting that sales tax will be a better option than income tax. Being a financial ignoramus, I was wondering from the layman's pov as to which one would be more convenient and I am leaning more and more on sales tax... as long as they do not take all your purchase cost towards sales tax. I mean, you go to buy bread and suddenly it costs 12 bucks a packet whereas before it was 3 bucks... the remaining 9 going towards sales tax.

So, if they assure that they keep sales tax reasonable then would that be advantageous than income tax What other loopholes are there? Maybe online purchases... people would do more online purchasing and avoid sales tax completely... effectively paying no taxes.

Any thoughts... o financial gurus?
I support a national sales tax too. The most feasible proposal is to tax everything except groceries equally. Sales tax is a very regressive tax as it impacts lower earners more than higher earners. Therefore, there has to be some give back. One of the proposals is for people below a certain income to be able to file for a "refund" on sales tax paid for the first x dollars spent on taxable items. Online shopping wont help, Sane Pra. There will be no exceptions - sales tax would become mandatory. It could also be added as a value added tax so that it is built into the price of the item itself and is collected by the manufacturer of the goods so no one even gets the option of skipping the tax although there are many opponents of a VAT system.

On the downside, there is the fear of the "paradox of thrift" phenomenon. That people will save more and spend less because of the sales taxes. This causes the tax rates to go up and the economy to suffer and can be a vicious cycle.

IMO, it is a fairer taxation system than the current one. Heck, even a flat tax system is fine by me. After the first 30K of income, its a flat 20% (or whatever) tax rate for the remainder of your income. No deductions .. no calculations, no jhanjhat.
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Old October 12th, 2010, 05:50 PM
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Re: Income Tax or Sales Tax

So, how about a variable sales tax. Every product is grouped into multiple levels... necessity, comfort, luxury and so on and so forth. Lower income people buying a luxury item got to pay the hefty sales tax... but everybody gets the necessary items at a lower sales tax.

It can't be an arbitrary system... but a flexible and evolving one. Products can keep changing their groups based on what their current necessity is. Maybe a separate committee that does these things (more jobs) with constant feedback from the polity.

Tax even services and web-sales and maybe even groceries... but reasonably so that there is no thrift going on. I don't think that the state of affairs will induce thrift. Every one wants what the other has bought... keeping up with the joneses and patels syndrome.

Also, keep track of what people are buying. If they are buying luxury or comfort items more often than required... tax them higher and higher for each repeated sale. With the extent of computers the whole sales-tax thing can evolve into a highly sophisticated big-brother-watching kinda system. With the current state of affairs we need a totally new approach to things... maybe this is it.
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Old October 13th, 2010, 06:58 AM
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Re: Income Tax or Sales Tax

Quote:
Originally Posted by Sane Less View Post
Don't know whether this has been discussed before... but if it has then don't freak out, Preimy pai... chill... put some ice on it

Some politicians are suggesting that sales tax will be a better option than income tax. Being a financial ignoramus, I was wondering from the layman's pov as to which one would be more convenient and I am leaning more and more on sales tax... as long as they do not take all your purchase cost towards sales tax. I mean, you go to buy bread and suddenly it costs 12 bucks a packet whereas before it was 3 bucks... the remaining 9 going towards sales tax.

So, if they assure that they keep sales tax reasonable then would that be advantageous than income tax What other loopholes are there? Maybe online purchases... people would do more online purchasing and avoid sales tax completely... effectively paying no taxes.

Any thoughts... o financial gurus?
Not a financial guru but here is my take...

I would think that having a national sales tax is not ideal but may be better than income tax, precisely because of simplicity. Also, it would give you better control over what you want to buy. Agreed that necessities will also be targeted which means (like Melly said), the tax would hit pretty hard on lower income groups. But I still like the concept of having control over what I purchase unlike in income tax where my money is gone before I get a chance to even see it.

On the other hand, there are loopholes with VAT too. Even if you end up taxing luxuries higher than necessities, black markets would start to mushroom. I wouldn't be surprised if the economy is affected and the crime rate shoots up trying to make the best of black market.

If you are shopping out of your own country, where they have national sales tax, you can claim your VAT. I would also think that with high sales tax we might start to save more and try and avoid luxury items.
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Old October 13th, 2010, 10:06 AM
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Re: Income Tax or Sales Tax

It's the classic "Direct Vs. indirect taxes". There's good and bad in both. Most countries have a mix of both. Whatever the system adopted, what is necessary is a) a reasonable level of overall taxation so that the citizen doesn't feel overtaxed, b) ease of calculating / recording / paying the taxes, and c) an effective monitoring system.
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