Consumption Tax versus Income Tax

• gut

  Bigdogg;868251 wrote:I think he means don't pay federal income taxes. Everyone pays some sort of tax.

  Yes, I would have thought that should be obvious.
  http://money.cnn.com/2009/09/30/pf/taxes/who_pays_taxes/index.htm
  
  "When considering federal income taxes in combination with payroll taxes, the percent of households with a net liability of zero or less is estimated to be 24% this year, according to the Tax Policy Center's estimates."
• Tobias Fünke

  

  That is from 2009, show me a 2011 figure.
• gut

  Tobias Fünke;868514 wrote:That is from 2009, show me a 2011 figure.

  Yeah, because it's really changed all that much to matter to the point being made. Seriously? If anything, it has probably gone up.
• BGFalcons82

  

  Tobias Fünke;868514 wrote:That is from 2009, show me a 2011 figure.

  
  How can he find 2011 tax data when it's still 2011? Anyone file their tax returns yet?????
• Tobias Fünke

  

  BGFalcons82;868581 wrote:How can he find 2011 tax data when it's still 2011? Anyone file their tax returns yet?????

  
  That was from Oct. of 2009 and using 2009 data no?
  
  The point remains, it's not that the government is permanently forcing people by the millions into some psuedo-serfdom of aid-for-votes or whatever the hell a lot of you have conjured up, it's a temporary spike because of the deep recession. It will get better.
  
  That said, Obama blows dick.
• gut

  Tobias Fünke;868886 wrote:That was from Oct. of 2009 and using 2009 data no?
  
  The point remains, it's not that the government is permanently forcing people by the millions into some psuedo-serfdom of aid-for-votes or whatever the hell a lot of you have conjured up, it's a temporary spike because of the deep recession. It will get better.
  
  That said, Obama blows ****.

  
  It's been in the well over 30% for most of the last decade. So a little bit more than a "temporary spike". But keep trying.
• Sonofanump

  Income tax will result in under the table workers.
  
  Consumption tax will result in a black market.
• Tobias Fünke

  

  gut;868909 wrote:It's been in the well over 30% for most of the last decade. So a little bit more than a "temporary spike". But keep trying.

  
  Then show me those statistics.
• gut

  Tobias Fünke;869184 wrote:Then show me those statistics.

  
  
  Next time, trying using Google and educate yourself before making stupid statements.
• O-Trap

  

  Sonofanump;869109 wrote:Income tax will result in under the table workers.
  
  Consumption tax will result in a black market.

  
  Actually, both will exist, regardless. The black market is very much alive and well already.
  
  Here is the difference: While both would continue to be against the law, the black market adds an additional element of risk (quality of the product itself).
  
  For example, one of the biggest black market consumables is prescription medication. Namely, Viagra. However, in confiscated shipments they've found extremely dangerous chemicals (in one case, even rat poison). Potential buyers are 100% unwitting to this prior to consumption.
  
  The black market exists now because of the price of products (sales tax doesn't help, but is low enough that it's not usually the dealbreaker). While a consumption tax may affect it, you'll have to remember that there will be additional spendable income, and many will take on the additional cost in order to ensure safety and peace of mind.
  
  I am acquainted with a few people who deal on the black market as a full-time enterprise, and they aren't nearly as excited about the idea of a consumption tax as you'd think, because they see it as basically a trade-off. More spendable income will offset much of the higher tax on products, so they don't anticipate it ushering in the economic Christmas that some suggest.
• believer

  

  gut;869206 wrote:

  After itemized deductions (in particular the mortgage interest, local taxes, and charitable contribution deductions) coupled with the $3,650 exemption for being alive, I paid in $6,000 and still got back over $1,000....and that's even with me taking every possible allowance to decrease payroll withholdings so I'm not giving the Feds an interest-free loan every year.
  
  God bless the progressive tax system!
• gut

  ccrunner609;869601 wrote:with basically a stripped down tax code for consumers and manufacturuers of goods, the free market will adjust prices to reflect that the value of ones income stayed the same. Since all taxes are passed on to the average Joe buying stuff, less intrusive taxes for all levels the playing field.

  Not really. Even if true in some cases, some companies have more ability than others to maintain price. You are essentially arguing that the price will drop because people don't have more money to pay the tax. I think you would find that, in actuality, many businesses make less than a 10% margin so there is no way they'd be able to stay in business dropping prices to offset the tax. The theory actually goes that reducing income taxes as part of it would leave people in the same position, i.e. with more money to pay the consumption tax and ultimately left with the same amount of after-tax discretionary income. The FairTax people were arguing that either prices drop because businesses don't pay corporate tax any more, or that wages rise for the same reason. Both are theoretical reasons that, while sound, are likely to miss the mark by a wide margin in practice.
  
  What you are saying relies on the belief that all or the majority of taxes are passed on to the consumer. That's a gross oversimplification. There would be winners and losers and some goods that are passing on that tax could drop in price to offset, but other goods either are not passing all or most on and/or they simply have more pricing power to maintain margins. The net effect is undoubtedly inflation, but probably less than 10% (or whatever the proposed consumption tax would be).
• BGFalcons82

  

  gut;869716 wrote:What you are saying relies on the belief that all or the majority of taxes are passed on to the consumer. That's a gross oversimplification.

  
  No it isn't. Virtually all taxes are passed along to the indivdual.
  
  In my industry, as in all others I would suppose, we are required to pay Workman's Compensation taxes, Unemployment Insurances, franchise taxes, and city income taxes to name the most common ones. I can guarantee you 100% that these taxes are included in our bids and budgets submitted to the owner. Our corporation, as well as virtually all others, pass these taxes on down the line to the ultimate end user via embedment in the price of their products/services.
  
  If you are referring to Corporate Income Taxes, then those are only enforced on corporations making a profit. Profits are generated by the end users consuming products/services. Therefore they pay these as well.
• believer

  

  BGFalcons82;869955 wrote:No it isn't. Virtually all taxes are passed along to the indivdual.

  Absolutely. One way or another....in one form or another...taxes that businesses pay are ultimately passed along to the end consumer.
• gut

  BGFalcons82;869955 wrote:No it isn't. Virtually all taxes are passed along to the indivdual.

  
  Theoretically...In actual practice, no. It requires the assumption that costs and capital structures are equal, and they most definitely are not. A business with a higher cost structure in a competitive industry has to absorb some of that tax because otherwise their price becomes uncompetitive and they don't sell as much. The ability of a business to pass on taxes is entirely dependent on the elasticity of its goods and its pricing power in the market.
  
  Most, but certainly not all taxes are passed on. But back to the relevant point that a consumption tax would result in lower prices because the consumer now pays directly is patently false. There will be a variance/distribution with some companies having better ability to maintain prices despite the sales tax increase and on average it will be inflationary. No well-run business is going to say "well, we aren't paying that 10% anymore so we'll lower our price". No, they will fight to maintain price. And especially with suppliers and others in the middle of the chain, often with contracts, they will be pretty successful at pocketing that tax savings.
  
  For proof you need look no further than stock market reactions to changes in tax policy. When credits or deductions are eliminated, or the corporate rates increase, the stock price almost always takes a hit because in reality the higher taxes do hurt the bottom line because it can't all be passed thru to the consumer. Works in reverse, as well, because when corporations get tax breaks it's positive for earnings because they don't lower their prices commensurately.
• gut

  ccrunner609;870762 wrote: Consumers will win if a consumption tax is the predominent way that the government recieves revenue.

  
  Really? If the govt collects the same revenues - which you claim consumers pay all the tax anyway - companies are going to take lower pre-tax margins because...they just love consumption tax? You're flat wrong. I understand the theory, but reality is if you look at how the stock market reacts to changes in tax policy earnings ARE affected, which means not all taxes are passed to consumers. That's because the real world has frictions and other constraints that the theories have to oversimplify to model.
  
  And your theory of the free market adjusting to lower prices in perfect competition is well off the mark, as well. Few industries enjoy perfect competition while most have 1 or 2 dominant players that set the price. Behavioralists would argue that most consumers aren't really going to look at the tax as part of the price, and indeed the price on the sticker won't change because the tax would be added at the register. They aren't going to hold it against the company for paying 10% more, they're going to bitch about the money the feds are taking from them.
  
  Really, just stop and think about this for a minute...When a company gets a tax break, do they respond by passing that on to the consumer or do they enjoy higher after-tax margins because they maintain their price? I've already given you that answer.