Steven Landsburg of Slate has declared "brilliant" Huckabee's plan to do away with income tax and replace it with a sales tax. He goes on and on about how smart it is and how the media bash it because they don't understand it.
Go to the comments and people are all over each other: "Rich people spend less of their total income, so this is a tax hike on the poor!" vs. "This is fairer because it grants you the use of your until you spend it, instead of taking a percentage up front!"
Do any of these people realize that the system exists and has existed for decades in other countries? It is called a Value Added Tax.
pro: You get to keep all your money and pay taxes only when you spend. In addition, instead of taxing the rich for being rich, you tax anyone who buys a luxury item. Sales tax on staples are nearly zero. Taxes on Hummers can reach 100%. Rich people buy more high-end stuff so they pay a lot more in taxes.
con: Prices will go up. They have to go up when you include the taxes. The challenge is to get people (the same people who didn't get that adjustable rates on their mortgages might change) to see their budget in the big picture -- instead of paying taxes out of your paycheck, you will take home more and spend more. Easier blogged than done.
2 comments:
Correct if I'm wrong, but prices wouldn't go up on products -- total cost would. Supermarkets aren't going to start pricing bread at $8, but after increased sales taxes, it might cost that much.
True. My point is simply that gross cost -- the price at the register -- would balloon. Speaking of which, given the retarding economic indicators and the seeming panic at the Fed, we may see some inflation as it normally attends the R-word. Oh yeah, I'll say it. Recession.
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