Saturday, July 9, 2011

Abolish sales taxes

Sales taxes hurt consumers by reducing their purchasing power. When their purchasing power goes down, they end up purchasing less, and this in turns hurts merchants. This in turn forces merchants to lay off workers and place fewer orders, which has the dual effect of increasing unemployment and hurting manufacturers and importers.

As you have guessed it, this does not end there. When manufacturers receive fewer orders, they produce less, lay off workers, and order fewer raw materials. This in turns increases yet again unemployment and as manufacturers order fewer raw materials, natural resource extractors get hurt, and again, they lay off more workers.

Now, with all this unemployment, consumer spending takes a nosedive, which aggravates the situation further, and reduces revenues from sales taxes as a result. What do the States typically do when revenues go down? That's right, they increase the sales tax and make their predicament worse in the long run.

If States want to increase revenues, consumption taxes are the wrong way to go.


  1. Agreed. I also am not a big fan of corporate tax, though my reason on both is slightly different.

    I feel better taxing only once. The idea of taxing income as it comes into a company, then taxing it again as it is distributed as wages, and taxed once more when those wages are spent... it gets ridiculous. I would simplify the whole thing with income tax-only... and maybe an oil tax (though might be enough to just end all government subsidies and wars for the benefit of the oil industry).

    Plus, on a final note about sales taxes, especially to those who support eliminating income tax in favor of sales tax only: sales tax unfairly taxes the poor more than the rich, for the poor live paycheck to paycheck, spending most of their money (and therefore being taxed), while the rich save more money, which goes on to be untaxed wealth that is often sat on and bequeathed to children.

  2. Another thing that is ridiculous: taxing the income of government employees. I mean, isn't it tax money to begin with?

    My Canadian grandmother receives the canadian equivalent of social security... and has to pay income tax on it. It's kinda stupid.

    The problem with removing corporate tax and just having income tax is that executives will start giving themselves lower salaries and more non-taxable perks. Sure, use the company car. Take your family to Florida aboard the corporate jet and stay at the company condo. Borrow the company yacht. Use the corporate conference center for your daughter's wedding.

    Same thing but reversed: Corporate tax only and no personal income tax: Companies will have thinner and thinner margins while paying really high salaries.

    I can see that having a myriad of different tax types ensures that everyone pays something, and I can see people evading taxation by finding loopholes.

    And having income tax only would mean that people who work under the table would never pay anything.

    Maybe only keep sales tax for luxury items?

  3. Well, I over-simplified it all, because there's plenty of other taxes I didn't account for (like taxes on things already owned, like car titles or property taxes).

    I would never go for corporate-only tax, because a progressive income tax is the most important factor in achieving income equality. There is a natural adjustment to lower CEO salaries and bonuses if income over very high thresholds (like in the millions) is taxed at 80% or higher, as long as this rate dips sharply for six digit salaries.

    There must be some way of regulating corporate funds for personal use among executives without needing to tax income that should be distributed to employees as paychecks or towards growing the company.

    People do work under the table, and people get sent to jail for it. I tend to not use the possibility (or rather, the certainty) of some people not complying as the best justification for determining policy.

    Even in the current system, you can live off the grid, and frankly... if you use so few of our nation's social structure, maybe you don't need to be paying taxes. I'm concerned with those getting rich off the system not paying their fair share, not paupers who fly below the radar.

  4. I have thought about this, and I want to ask you something.

    If there is no corporate tax in a state, how do the out-of-state executives and owners of that company pay tax in the State where the corporation does business?

    If there is no corporate tax in a country, how do the foreign executives and owners of that company pay tax in the country where the corporation does business?