A 23 Percent Federal Sales Tax!! But Wait!

[jeffrey]

By Terry Rigg

We are so used to having our federal income tax, social security and medicare taxes withheld from our paycheck, most of us don't realize there are efforts to change this dramatically. There is a group going around saying that we should pay 23 cents on every dollar we spend in a federal sales tax. They must be crazy!

Wait a minute. If we are going to pay a sales tax to cover our income and social security tax, we won't have anything except our state and local taxes coming out of our pay. Even that doesn't add up to 23%. What are they talking about?

What if they told you that, not only would you not have federal and social security taxes withheld from your paycheck, you would see the following things happen:

*Elimination of the Internal Revenue Service, saving an estimated $420 billion annually
*April 15th would be just another day
*You would not have tax records to keep BECAUSE YOU WOULD NOT HAVE TO FILE INCOME TAXES
*And, no forms, no deadlines, no prepayments, no penalties, no audits, and never again an abusive IRS that can claim your assets without due process!
*Even illegal income would be taxed when it is spent
*Only new items will be taxed
*No American will pay taxes on necessities
*Cost of goods and service are estimated to decrease by 20% to 30% because manufactures and other companies will not be required to pay taxes (TAXES WILL ONLY BE PAID ON NEW MERCHANDISE AT THE RETAIL LEVEL)
*No tax on ANY investments
*Each taxpayer will receive a rebate equal to the taxes paid on necessities such as groceries and medicine, in advance of those purchases
*Seniors and low income families would be protected

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This list could go on and on about the advantages of a National Sales Tax. The truth is that our current system of taxation is totally out of control. The 10s of thousands of pages of tax laws have even the best tax minds confused.

Yes, 23% does seem like a lot of sales tax to pay in addition to any state sales tax you might have. You could wind up paying 30% on a car purchase of $20,000. Lets look at some of the possible savings with a sales tax.

Sales tax on car purchase - $6000
Final Cost of Car - $26000
Cost of car might be reduced 20% because the manufacturer doesn't pay any taxes under this plan. What is the cost of the car? $16000
Sales tax on car purchase - $4800
Final cost of Car - $20, 800

But Wait Again! You will be buying this car using your entire paycheck. NO DEDUCTIONS. That's hard to calculate. I can almost guarantee it will be below the initial $20000 price tag. Besides, $20,800 is only 4% above the price of the car, far less than most state's sales tax.

If you don't think companies will reduce their prices even though they aren't paying taxes, just imagine an entire nation knowing they are manufacturing their goods 20% to 30% cheaper and not passing that savings on to them. In addition, sooner or later one of their competitors will reduce their price, and the war is on.

To find out more about the National Sales Tax just visit Americans for Fair Taxation. You can also view a comparison of the different tax systems.

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Terry Rigg is the author of Living Within Your Means - The Easy Way and editor of The FREE Budget Stretcher Newsletter and Budget Stretcher web site. He has 25 years of experience counseling individuals and families concerning their personal finances.

[dhandaulat33]

system of oversight that would limit the amount of taxation

Hello, at present there is two local taxing bodies in Chicago who are proposing a host of new taxes, the city of Chicago and Cook County. Both governments are proposing massive tax increases. As a citizen, what recourse do I have? Can I alertly object and not pay without getting into trouble? Is there any system of oversight that would limit the amount of taxation? I mean what we do when our local governments decide stuff like this. It seems like there is no choice but to complain and pay it. What is your opinion?

[PrincessPerky]

you can complain to the politicians, and support politicos who favor alternate tax policies..you could not pay, but then you will end up in jail eventually.

[myself]

I certainly hope they don't institute this. As it is between SS, medicare, and Fed tax, we only paid 9.7% last year.
They're talking about it again in Washington here and there (from what I've heard).

[MonkeyMama]

Ah, if it only it were so simple. I show almost six figures on my tax return and only pay 9% federal income tax. I mean, come on. Yes a new car tax would be way more expensive than my entire income tax bill.

Also, since the current sales tax pays for local taxes I wondered what would come of that. If the federal rate were to be 23% (& the state would want to get a piece as well). So say we added 30% to our already 8% sales tax.
40%??? So I go from paying 9% on ALL income to 40% on some income? I have always thought this would hurt the middle class more than anything. There is a prime example.

I mean it's awesome for the poor, to remove the social security taxes (believe me they aren't paying any income taxes). But likewise, it's just one more middle class squeeze.

If they want to exclude the seniors and poor they will have to have something like the IRS administrate that. There will still be a lot of red tape in that regard. (Though certainly not near as much as we have now).

[myself]

Ah, if it only it were so simple. I show almost six figures on my tax return and only pay 9% federal income tax. I mean, come on. Yes a new car tax would be way more expensive than my entire income tax bill.

Also, since the current sales tax pays for local taxes I wondered what would come of that. If the federal rate were to be 23% (& the state would want to get a piece as well). So say we added 30% to our already 8% sales tax.
40%??? So I go from paying 9% on ALL income to 40% on some income? I have always thought this would hurt the middle class more than anything. There is a prime example.

I mean it's awesome for the poor, to remove the social security taxes (believe me they aren't paying any income taxes). But likewise, it's just one more middle class squeeze.

If they want to exclude the seniors and poor they will have to have something like the IRS administrate that. There will still be a lot of red tape in that regard. (Though certainly not near as much as we have now).

I agree.
And we're showing a few thousand shy of six figures ourselves (although luckily, that's a single income ... mine).

[LivingAlmostLarge]

It would be horrible, i agree.

[backtaxpro]

The libertarians in this country have been big proponents of a flat tax or a national sales tax. As a tax professional who has a job because of the IRS's complex code, I can honestly say that a national sales tax would be the best thing since sliced bread. The advantages as discussed above are real.

More importantly, it would encourage savings because if you don't spend, you don't pay the high 23% tax. Some argue that could hurt the economy, but I would state that over the long run, the cost savings would be tremendous and it would still tax the rich more than the lower classes as the rich would be taxed highly when they buy that big house, car, boat, etc. Right now the federal income tax actually discourages you from trying to make more or work harder because the more you make the more you pay.

[getforfree]

So, it means that if a person has some savings, after tax savings, that he already paid tax on, and then will need to spend it, he will have to pay tax again, on the same money. That's a ripof!!!!

[SimpleFinances4]

I would argue that the national sales tax probably would boost spending, but that drop in spending would seriously harm our economy. 70% of our GDP is based on consumer spending.