Where will inflation stop?

yupididit said:

In reply to frenchyd :

So at the grocery store am I'm paying 2% on the entire purchase or 2% of the price of each individual item? 

Well, would you buy 49 cents worth of gas to avoid paying a penny in tax?   
         I mentioned earlier that you can't break up bulk purchases.  Or the IRS is going to come after you. 
     Taxes have to be paid by the people of this country.   This is a simple, easily understood way of collecting those taxes.  That's all. 
  The question is would you rather pay 2% VAT  or calculate and fill out forms to basically pay the same amount?  

yupididit said:

In reply to frenchyd :

So at the grocery store am I'm paying 2% on the entire purchase or 2% of the price of each individual item? 

There's... no difference.

ProDarwin said:

SV reX said:

In reply to ProDarwin :

Since Frenchy never mentioned anything about tax sheltered accounts, let's skip that part. All he said was "let's tax stocks".  
 

We can always find exceptions. 

Yeah, I'm just saying he is assuming all transactions are taxed, but your reference to capital gains only applies to taxable accounts.

Exceptions are the thing I have an issue with - hence my possibly outlandish proposal several pages back.

I started this saying No exceptions.  Not for religion, or poverty, social need.  
  As soon as we start down any of those slippery slopes the rate has to go up to make up for losses. 
       We have a supposed progressive tax rate now and the reality is with exemptions it's anything but progressive. 
It's far too regressive  in fact.  

One hint... taxation /= inflation.
 

Inflation is driven by too many dollars chasing too few products, otherwise known as scarcity. 
 

Scarcity is currently driven by the government shutting down sectors in the economy. 
 

Duke said:

yupididit said:

In reply to frenchyd :

So at the grocery store am I'm paying 2% on the entire purchase or 2% of the price of each individual item? 

There's... no difference.

 

I know that much, I better given my MBA and pursuit of a Masters in Artificial Intelligence, math isn't my issue lol. But, he mentioned that you can't break up bulk purchases as if there was a difference. And he even brings it up again just the post before yours stating "or the IRS will come after you". 

I'm glad y'all are soooo smart that you have to tell me this, again. I appreciate it. I was asking him to for clarification by asking him a simple question. Either way I'm confused by his confusing idea. 

In reply to yupididit :

I'm sorry you can't sense my attempt at humor.  
      I'll try to keep it plain.  
  Nothing of my proposal will reduce taxes. Nor should it increase taxes.  The total to be collected will remain the same.  
      Only the method of collecting taxes. 
   
   Current system has over 77,000 pages of "explanations?" Of the tax code.  Plus legal interpretations of the tax code with special note  of what is defined as legal precedent. 
     
      Complex forms to fill out. Attorney required to argue  regarding legal precedent.  Etc.  
all just to define what is income.  
   
 The VAT method puts a 2% tax on items purchased.   If you buy it you pay tax on it. 
 No exception. 

In reply to frenchyd :

Why 2% specifically? 

Did you see rx reven and Steve's reply?

In reply to yupididit :

OK, sorry, I hadn't seen every word in every post in this thread.  Apparently I missed your... sarcasm?  ...humor? ...whatever?  ...because of that.

In reply to Duke :

He was busting on Frenchy saying "you can't break up bulk purchases" like it made a difference. A few of us missed Frenchy saying it, but caught it on him. 
 

the best part is Frenchy doubled down on it a few posts ago...

I'm not going to go too deep into reading, but if French thinks a 2% consumption tax will replace income tax, he missed a couple of math classes.  

The total tax load in Canada is around 50%, between federal and provincial income tax, property tax, 6% provincial and a 5% federal tax on almost everything, and we still run huge defecits.  Take out health care  and you are still looking at a pretty big percentage...

Steve_Jones said:

In reply to Duke :

He was busting on Frenchy saying "you can't break up bulk purchases" like it made a difference. A few of us missed Frenchy saying it, but caught it on him. 
 

the best part is Frenchy doubled down on it a few posts ago...

This. Thank you! 

Streetwiseguy said:

I'm not going to go too deep into reading, but if French thinks a 2% consumption tax will replace income tax, he missed a couple of math classes.  

The total tax load in Canada is around 50%, between federal and provincial income tax, property tax, 6% provincial and a 5% federal tax on almost everything, and we still run huge defecits.  Take out health care  and you are still looking at a pretty big percentage...

Apparently you missed the part of No exceptions.  
     Right now most things can be purchased without paying any tax. You can buy companies,  big and small. No taxes.  Those companies can buy material, supplies, equipment, planes, condo's, etc.  and pay no tax.  
     People can buy stocks, bonds, etc. no tax. 
       Instead of a Income tax with all the exceptions etc a small simple VAT tax pays the money needed to run the government.  

GameboyRMH said:

bmw88rider said:

So until every place is taxed the exact same and there is no incentive to hold your money in XYZ state or country, we will always have people with mobility taking advantage of the cheapest COL and taxes that their situation will allow. 

And sales-tax-based or transfer-tax-based systems create an incentive to hold and spend your money *outside* of the state or country where they're implemented, so those would only add that incentive to whatever incentives other jurisdictions may offer to hold money *in* them. If you look at foreign tax shelters as a leak in the local tax system, they're like trying to fight that leak by pressurizing your container.

Since it's a national sales tax there is no place to go where it won't be collected.    
     The part about sending money out of the country to evade  taxes is covered. 

In reply to frenchyd :

So let me ask a real world question. So what happens when I buy bit coin from my Costa Rican bank account or my Polish bank account as an American citizen? I'm just an average Joe American and I have bank accounts in both those countries due to property holdings.

Are you saying now that this would be taxed as well? That is the question to be answered. So take that to another example. If I am rich, I may have a boat or plane or multiple homes or classic Ferrari. So you think unless it's a small purchase, I'm not going to go buy it where it makes the most sense for me using the appropriate bank account. 

It's just not easy to say that oh place a blanket tax and that will get the rich to pay their share. There are some great how money works videos on YouTube that go through how the rich actually buy things. They are more leveraged than you think. 

Taxing out-going assets will definitely ensure that the assets are never brought on shore. That was part of the Trump tax cut. The corporate reduction in an attempt to on-shore more foreign assets. Look up how that went. 

In reply to bmw88rider :

Taxes are different in every state in the union. But people don't buy everything in North Dakota for the cheaper taxes there. 

bmw88rider said:

In reply to frenchyd :

So let me ask a real world question. So what happens when I buy bit coin from my Costa Rican bank account or my Polish bank account as an American citizen? I'm just an average Joe American and I have bank accounts in both those countries due to property holdings.

Are you saying now that this would be taxed as well? That is the question to be answered. So take that to another example. If I am rich, I may have a boat or plane or multiple homes or classic Ferrari. So you think unless it's a small purchase, I'm not going to go buy it where it makes the most sense for me using the appropriate bank account. 

It's just not easy to say that oh place a blanket tax and that will get the rich to pay their share. There are some great how money works videos on YouTube that go through how the rich actually buy things. They are more leveraged than you think. 

Taxing out-going assets will definitely ensure that the assets are never brought on shore. That was part of the Trump tax cut. The corporate reduction in an attempt to on-shore more foreign assets. Look up how that went. 

The IRS can trace money pretty much anywhere.  Without all those income tax forms to process they can go back to their main function of enforcement. 
I suspect they can catch international money transfers. 
 

Ask yourself if you would rather deal with forms regarding income or pay a couple of dollars per hundred on purchases? 
   Taxes on income is the government taking money you've earned.
     While a sales tax is you deciding to buy something knowing that 2% of what you pay is going to the government that protects you and builds highways for you to use,  etc.  

An interesting article containing arguments that this is largely a consequence of less competitive/more monopolized markets:

https://www.cbsnews.com/news/greedflation-is-corporate-profit-taking-driving-prices-higher/

tester (Forum Supporter) said:

One hint... taxation /= inflation.
 

Inflation is driven by too many dollars chasing too few products, otherwise known as scarcity. 
 

Scarcity is currently driven by the government shutting down sectors in the economy. 
 

 

It's rare that a person in today's world can correctly define inflation. As long as the decision makers cannot, there is no solution.  
 

And inflation is currently a two edged sword of doom: more dollars and less goods!  Enjoy the ride, it's gonna get bumpier.  

In reply to SV reX :

Boost_Crazy said:

In reply to frenchyd :

Frenchyd, there are many aspects of a flat tax that I find appealing, but your proposal will not do what you think it will do. First, 2% is way, way under the average income tax rate. It would mean dramatic cuts and shrinkage of the federal government to a fraction of it's current size. That's too much for even most small federal government advocates. For comparison's sake, the the average net income tax rate is around 13%. So giving you the benefit of the doubt that 2% was just an example and you want to keep the government the same  size, you need need everyone to pay a flat tax of 13%. But here is an example of current net tax rates (2019 numbers)...

All taxpayers 13.29%

Top 1% 25.57%

Top 5% 21.98%

Top 10% 19.89%

Top 25% 16.73%

Top 50% 14.55%

Bottom 50% 3.54%

So your proposal just about quadruples the federal taxes for the bottom 50% of earners, and cuts the taxes of the top 1% in half. Moreover, your proposal is on money spent, not income. High income earners don't spend all of their money. Lower income earners not only spend all of their money, but often borrow to make purchases. So they will be taxed on more than they even make! 

 

 

This is one of the cleanest arguments against the flat tax in this thread, and I appreciate it.   However, I think it is too simplistic, and overlooks a lot.

There is no need to match the income tax percentage RATE.  What needs to be matched is the REVENUES COLLECTED.  I know that sounds like splitting hairs, but it's really not...

In order to assess the viability of the idea, an analysis would have to be made of consumer spending, not government spending.  Once overall purchasing trends are understood, a percentage can be applied to THAT to generate the needed revenues.

Obviously, wealthy people spend much more money than poor people.  So, a flat tax generates an automatic increased load on the wealthy, simply because they spend more.  It doesn't translate as a percentage.  It translates as gross revenue.

Wealthy people don't ever pay 25.57% on their income.  That's the highest bracket, but their actual average taxes are less (because they pay smaller percentages on the smaller brackets).  More importantly, they ONLY pay tax on their TAXABLE income.  After deductions, etc, this is not a very large percentage of their gross income.  In a flat tax scenario, they would be paying tax on ALL of their purchases, not just the small percentage deemed "taxable income".

You mentioned borrowing... High income earners borrow lots of money for purchases too!  Buy a boat?  Pay a federal sales tax.  Buy a Lear jet?  Pay a federal sales tax.  Regardless of whether it is borrowed money or not.

It's also possible a flat sales tax would apply to more industries.  Frenchy mentioned stocks (don't think this would work, and capital gains are already taxed for every sale, but the idea is on the table).  Sales tax on medical treatments?  Foreign exports?  Real estate?  Raw goods?  Services?  There are a lot of question marks...

It's easy to offer relief to lower income earners.  Just define some essentials (like food) that are not taxable.

I am also a fan of how a flat sales tax would enable capturing tax revenue from illegal activities.  Organized crime doesn't pay any income tax.  But they generate $2.7 trillion dollars in revenue.  Wouldn't it be fantastic to be able to collect taxes on all of their purchases?

Tourists (who pay no US income taxes) would help pay for the costs of running our country with every purchase.  This would bring in revenue from people who are currently not taxpayers.

Another by-product... a whole LOT of very intelligent people (like accountants, CPAs, IRS workers, and the bookkeeping staff of every company in the country) who are currently burning energy trying to calculate tax rates, or plan tax strategies would no longer be needed for these routines.  Their talents and energy could be diverted to other productive enterprises.

I am not qualified to calculate how the math would actually work.  I have no idea if 2 or 3% would work, or if it would need to be 13%.  But I know it's not as simple as taking the average income tax percentage and applying it to everyone.

My opinion is that aversion to federal flat sales tax ideas is much more driven by politics than by math.  When people say "OMG, the poor will pay more in taxes!", LOTS of poor people run to the polls to vote against it.  When people say "OMG, wealthy people won't have any deductions!", LOTS of wealthy people flex their political muscles to exert pressure against it.

I like the idea.  I think it has merit.  Just don't know about the details.

Sorry for the late reply, I just saw this. My example was of the net tax percentages not tax brackets. The tax brackets are much higher. As you pointed out, they don't actually pay the tax bracket percentage, I used the real adjusted numbers. So the numbers in the chart are the actual percentages of revenue collected by government from each income group. For example, the top 1% pay $25.57% of the total income tax dollars received by the government. I should have written that instead of net tax rate. If you add up all of the columns, it should be 100%. The top half of the earners pay 96% of the income taxes under our current system. The bottom 50% pay very little- less than 4%, and those at the very bottom actually get more money in tax refunds than they pay in the first place, they effectively have negative tax rates. 
 

I think the problem with the flat tax is that people think it's a way to cut a pie to get more pie. It won't work that way. Under a flat tax, the only way to get the rich to pay more is to make everyone pay more. More pie. Because you just made the poor slices bigger, which has to shrink the rich slices if you kept the pie the same size. That is math, no way around it. All of these ideas of taxing additional things- just make the pie bigger. It won't- can't- change the percentage of the pie paid by the wealthy. That is the very nature of a flat tax. If tax revenue stayed constant under a flat tax Vs. our current tax structure, the wealthy would have huge tax brakes and the bottom 50% would get huge tax hikes. In practice, it would be even greater than the percentages suggest, since the wealthy don't spend all of their money and the poor spend more than they earn. 

I'm in no illusion the pie gets bigger if we just tax the rich. 
     But they love the current deal. They control 90% of the nations wealth and only have to pay  25% of the taxes!!!! What a deal.  
     The tax code is needlessly complex.  77,000 plus pages plus endless legal precedents which require $1000+ /hr lawyers. Which almost no one can afford.  
    That simply does not fit inside our Declaration of Independence which says,           All men are created equal! 

Back in the 1960s, there was a federal excise tax.  It may have been earmarked to pay for the war we were having then. I recall it being 10%.  I don't recall everything it was applied to, but among other things, the tax was applied to jewelry, cosmetics, & luggage.  

There was also a tax on everyone's phone bill, specifically to pay for the war. It was small maybe 50 cents or a dollar and I think it was the same for all phone bills.  If you had only a home phone bill, the tax was the same as that for corporate headquarters of the company you worked for. 

I'm not claiming to have a good solution, but it seems to me that a combination of income tax reform plus some sort of consumption tax could work.

In reply to M2Pilot :

Simple. 
Simple.       
Simple.  
  Income tax was created by Lincoln  to pay for the civil war. 
    Today it's 77,000+ pages plus all legal precedents. 
 Why not just eliminate such a messy system?  

In reply to frenchyd :

I'm in no illusion the pie gets bigger if we just tax the rich. 
     But they love the current deal. They control 90% of the nations wealth and only have to pay  25% of the taxes!!!! What a deal.  
     The tax code is needlessly complex.  77,000 plus pages plus endless legal precedents which require $1000+ /hr lawyers. Which almost no one can afford.  
    That simply does not fit inside our Declaration of Independence which says,           All men are created equal! 
 

Frenchy, you are adding apples to oranges and telling us the answer is bananas. The rich control 90% of the wealth but "only" pay 25% of the taxes. But their wealth was accumulated over their life, and that 25% is paid every year. How much of their wealth would you have us take? Someone already said 100%, so you can't have a worse answer. Let's use you for an example. We all know that you own a million dollar home, so your worth is over $1 million. How much should you pay? You control a disproportionate amount of wealth compared to many, who don't even own homes. We should all be equal, right? Or is it different when it applies to what you worked hard for? 

You would not like equality. Equal would be a flat tax and you would pay the same rate as the rich. We do not live under an equal system, our system redistributes wealth from the rich to the poor. You want it to be less equal, despite what your math would produce. Or you want equal outcomes for unequal work/talent/risk. Show me a way to balance the scales and make things "equal" without confiscating the labor of one to give to another. 

All men are created equal. How they manage their opportunity is not. 

In reply to frenchyd :

In reply to M2Pilot :

Simple. 
Simple.       
Simple.  
  Income tax was created by Lincoln  to pay for the civil war. 
    Today it's 77,000+ pages plus all legal precedents. 
 Why not just eliminate such a messy system?  
 

Because then the government would lose many of it's control levers. Increased taxes for things they want less of, tax breaks for things that they want more of. Those 77,000 pages weren't written on accident, they are pages and pages of carrots and sticks.

Boost_Crazy said:
our system redistributes wealth from the rich to the poor.

So at what point will the poor and rich swap places as a result of this system?