Thread: Economic Politics (in a non-political way)

The effects of a consumer tax have been debated, and its effectiveness would be in the details.

The key for the tax would be to tax spending on items not considered basic staples. Taxing the staples would make the tax be mostly burdensome to the poor ... since they purchase mostly staples (food, clothing, shelter) as a proportion to their income.

Personally, a tax on spending and a cut in the personal taxes would have two effects on me: 1) I'd save more and 2) I'd spend more as well since I'd have 40% more money. So for example, if I pay $400K in taxes this year and suddenly I didn't have too ... I''d probably save $300K (save means to invest, stocks/partnerships/munis) and spend $100K in various consumer goods/travel/etc. So from my perspective, I would contribute to stimulating the economy under this tax plan.

Like many good ideas, getting something like this to pass in the US is unlikely.

It is a very good question.

And, just for clarification, I don't see this as economic politics, I see it as economic policies.

I come from a country where we have both taxes. The idea originally was to tax the sales (so, in effect, paying as you use/consume) for products that were considered non-essential (food bought at the supermarket, for example, was exempted, but buying food at a restaurant had the sales tax) and there was a personal income tax to the "rich" so they would contribute more.

Problem was, the original idea deformed as the government spent way more than what they had and then the personal income tax started trickling down and affecting more and more middle class families, and the sales tax was expanded to cover pretty much every single item.

I've heard of policies like this before; in my money management class, the teacher always said it would be best to simply tax the goods and not the individual people, because then you're taxing people who are spending money, as they spend it. And, essentially, taxing everyone equally for things they don't need, but ideally not taxing things they do, such as food.

The problem was, as he said, that it would require somewhere around a 20%+ sales tax, which would certainly seem quite absurd, as we're used to paying, I believe, somewhere around 5-7% currently. But, if this would eliminate income taxes and whatnot, I would be for it.

Additionally, this would of course get rid of countless tax, legal, and accounting type jobs; which could also hurt the economy. But, I'm not completely sure how that would all end up, if something like this were to happen.

I am not understanding how this is different than what we have here in Texas. We do not have a state income tax. But we do have a state and local sales tax. Combined the tax is about 8.5%. Staples bought at grocery stores are tax exempt.

Is sales tax what you are referring to as a consumer tax?

Originally Posted by Runum

I am not understanding how this is different than what we have here in Texas. We do not have a state income tax. But we do have a state and local sales tax. Combined the tax is about 8.5%. Staples bought at grocery stores are tax exempt.

Is sales tax what you are referring to as a consumer tax?

Consumer tax is basically an inflated sales/goods&services tax, that would be implemented to abolish personal income tax at the state and federal level.

Likewise, staples would be exempt.

Originally Posted by Runum

I am not understanding how this is different than what we have here in Texas. We do not have a state income tax. But we do have a state and local sales tax. Combined the tax is about 8.5%. Staples bought at grocery stores are tax exempt.

Is sales tax what you are referring to as a consumer tax?

Sounds like I might have to move to Texas!
Mostly because I hate filling tax returns. Lol