The Other McCain

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Give An Over-Reaching Government A Sales Tax: What Could Go Wrong?

Posted on | August 1, 2011 | 28 Comments

by Smitty

Ace toys with the notion of a national sales tax. Let’s put it like this. Once upon a time, a certain uncle had too much crap. He had houses, boats, cars, furniture, businesses, sweethearts, the works. Managing all the crap was a significant burden, with all of the insurance, maintenance, travel time, licensing, paperwork, &c. Finally the guy breaks down and buys a computer. Simplifies matters. All of information required to manage the large collection of crap gets automated. Streamlined. Woo hoo.
Did the guy, Sam, let’s call him, benefit from this? Why, no: no, he did not. All of the time freed up by the information technology was spent on new crap: planes, bikes, extreme sports equipment. This was because Sam did not have an information management problem; Sam had a crap problem.
My contention is that a national sales tax is just going to be an enabler, avoiding the grown up realities of what Uncle Sam properly should be doing. You know, the whole Constitutional enumerated power thing.
With a national sales tax firmly in hand, Uncle Sam is just going to ratchet that thing up, at say, 0.1% per year, and find new crap to spend it on. When that becomes politically untenable, other “balancing” tricks, or whatever the godforsaken weasel-word for taxation of the day happens to be, will be employed in a vain effort to make the stalling Keynsian cart draw the Hayekian horse.
All I’m doing here is adapting a theme from the brilliant Andrew Klavan:

This is by no means a defense of the Byzantine nightmare that is the IRS; certainly, that organization, and that fine blend of Stephen King and Franz Kafka called the tax code need to be eliminated outright.
However, a sales tax without proper analysis just moves the problem.

Update: linked by That Mr. G Guy

Category: Ace of Spades, Taxes

Comments

28 Responses to “Give An Over-Reaching Government A Sales Tax: What Could Go Wrong?”

  1. dad29
    August 2nd, 2011 @ 2:03 am

    He’s bringing up the Fair Tax, albeit he may not recall the name.

  2. Jack
    August 2nd, 2011 @ 2:31 am

    Not really dad29, he’s talking about a value added tax. It would be in addition to the national, state, and local taxes we already pay.

  3. A National Sales Tax? Are You F#*king Nuts? « That Mr. G Guy's Blog
    August 1st, 2011 @ 10:33 pm

    […] Smitty links Ace who thinks a National Sales Tax might be a good idea. Personally, I’m in favor of a Flat Tax. We can do away with the cumbersome IRS or at the least, streamline it significantly since everyone will be paying the same percentage of tax on their income and there won’t be a need for all those tax collectors. That way, everyone has skin in the game and might be more sensitive to the whole government as nanny providing all things to all people. Ace toys with the notion of a national sales tax. Let’s put it like this. Once upon a time, a certain uncle had too much crap. He had houses, boats, cars, furniture, businesses, sweethearts, the works. Managing all the crap was a significant burden, with all of the insurance, maintenance, travel time, licensing, paperwork, &c. Finally the guy breaks down and buys a computer. Simplifies matters. All of information required to manage the large collection of crap gets automated. Streamlined. Woo hoo. Did the guy, Sam, let’s call him, benefit from this? Why, no: no, he did not. All of the time freed up by the information technology was spent on new crap: planes, bikes, extreme sports equipment. This was because Sam did not have an information management problem; Sam had a crap problem. […]

  4. Mike
    August 2nd, 2011 @ 2:35 am

     Linked and quoted at http://wp.me/pTkxi-PI

    Personally, I’m in favor of a flat tax. That way, everyone has some skin in the game.

  5. Joe
    August 2nd, 2011 @ 2:53 am

    If there is a constitutional amendment to get rid of the income tax, I would consider a sales tax as an alternative.  Until then, I am not going for it. 

  6. Anonymous
    August 2nd, 2011 @ 3:10 am

    He mentions the VAT while explaining the danger it presents. Ace’s point about a federal sales tax, often called the fair tax, is that he believes that people will pay attention as it causes prices to rise. It would be right there on the receipt. With a balanced budget amendment and a 2/3 majority to raise the tax it could be worth exploring. Apparently there aren’t enough private plane owners willing to do their part in ending the IRS.  I for one would be willing to consider the fair tax as a replacement.

    We do not currently have a “national” sales tax.

  7. ThePaganTemple
    August 2nd, 2011 @ 3:18 am

    I’d like to see a combination of a 14% flat tax and a 14% sales tax. But that would only be viable if you slashed regulations by about seventy percent, did away with all withholding, refunds, and loopholes, did away with all sin tax, gas tax, death tax and marriage penalties, privatized Social Security, and doubled minimum wage (yeah I know that parts not conservative orthodoxy, sue me).

  8. ThePaganTemple
    August 2nd, 2011 @ 3:21 am

    Only if you did away with withholding and refunds. That’s going to be a hard nut to crack, because that’s what liberals count on to keep their base supporting high progressive taxes. If they keep getting all or most of it back at the end of the year, they aren’t going to care how high taxes are on everybody else.

  9. Ladd Ehlinger Jr.
    August 2nd, 2011 @ 3:43 am

    Any form of income tax requires you to spy on yourself to to the government.  Sales tax all the way, kill the income tax.

  10. Charles
    August 2nd, 2011 @ 3:50 am

    Splitting the tax baby down the middle, I see. But why would you still need to collect so much tax if you privatized Social Security?

  11. Adjoran
    August 2nd, 2011 @ 3:56 am

    Yep.  Leave the 16th on the books and the income tax will creep back in – beginning as a very small percentage and only on the very wealthy. 

    Which is also how it started out when first ratified.

  12. Tennwriter
    August 2nd, 2011 @ 4:56 am

    I read Althouse, and was fine until I read the comments.  Much of what is discussed is similar to Ace’s idea.

    Much of it was in favor of the fair tax based on the idea of ‘getting some skin in the game’ and emotion (irritation) based on ‘those people’ (the poor) getting EITC.

    I’m pretty sure most of the complainers are Republicans, although they could be all mobies.  It would make sense for mobies to pretend to be heartless and just plain stupid Rethugs.  Unfortunately, I’m pretty sure these are my allies being brick in the head dumb.

    Imagine a poker table, and everyone at the table is cheating.  Everyone.  Industrialist, Wall Street Broker, Senior Citizen, Teacher, Gov’t ‘Crat, Congressman, Pundit, Reporter, and Poor Schmuck.  My Republican allies want to cut off the poor guy’s hand because he’s stealing nickels while everyone else is stealing dollars and way more.

    They are mad that some poor guy has a cel phone (practically needful today) and cable (I don’t have cable.  Too poor.  Guess I should vote Dem if the R’s are going to  spit on my face.  ‘Cept I’m too smart to do that.) and a big screen TV.

    Whoop-ti-do.

    What’s going on is not smart.  It is emotional.

    They have no lever sufficient to move the poor, and so they lash out.  The natural result amongst most of the poor would be ‘Oh yeah, you little punk?’, and an angry vote for the De’s.

    What is needed is seduction.  I don’t care what Roissy says, flowers with confidence is way better than letting your Inner Jerk out to play.  We’ve alreaeady done too much of that.

    I suspect however that many of these are the McCainiacs who litteredd the Internet with their threats last primary cycle.  They do smug self-righteous well, and threats well, but not Vision.

    “It’s Morning in America.”

    I’ve said it before A Sixty Percent Victory in the General Election is Out There.  But to grab it you need a Vision motivated by Love and Faith in God’s love for America that includes instead of this zero sum based anger,  this fretting that life is not completely fair, this class-warfare from the Right.

    Or we can all be McCainiacs. 

  13. Joe
    August 2nd, 2011 @ 5:21 am

    I am all for everyone paying tax and a sales tax does that.  Just end income tax first.  Dead, finished and buried.  Then we can talk. 

  14. Adjoran
    August 2nd, 2011 @ 5:25 am

    The “Fair Tax” as proposed by Boortz just won’t work.  To match the modern average of the income tax (not the depression-level collections under the Obama Regime), since it is not designed to replace other forms of taxes and revenues like excise taxes and gasoline taxes, it needs to collect 19% of GDP. 

    To get there, either there have to be no exemptions – including buying a house, a car, insurance, delivery fees – anything that’s a component of GDP – or a much higher rate than the proposed 15%.  Every major component of GDP exempted makes the required rate go up.

    And, as I noted above in reply to Joe, without a repeal of the 16th Amendment to restrict the income tax, we would find ourselves with both before very long.

  15. McGehee
    August 2nd, 2011 @ 5:26 am

    Repeal the 16th Amendment.

  16. Anonymous
    August 2nd, 2011 @ 6:35 am

    Clearly you haven’t read the FairTax.

    It in fact makes only one exception for applying the tax to all services and new goods, and that’s for education.  The rate is different than what you posted as well; as a sales tax it’s 30 percent, which works out equivalent to an income tax rate of 23%.  It also repeals all other taxes– income tax, gift tax, capital gains tax, FICA, death tax, the whole bunch of them, gone for good.  Note also that it’s only on new goods; any used good is tax-free.  One tax one time only.

    At the rate I quoted, *everyone* in all income levels does better.  Across the board.  How can that happen, that everyone has less of a tax burden yet the government still collects the same amount?  It’s simple: the FairTax is a lot more efficient so costs of tax compliance goes way down.

    One suggestion I’ve seen for guaranteeing that we don’t end up with the income tax again: a sunset clause in the FairTax, which states that after 5 or so years of having the FairTax, if the 16th isn’t repealed, then the FairTax is repealed and we go back to what we have now.  If the FairTax works, no one will want the old tax code back and repealing the 16th should be easy.

  17. Anonymous
    August 2nd, 2011 @ 6:47 am

    The same amendment establishing the balanced budget could contain that clause.
     A proper balanced budget amendment would have protections against unfunded mandates imposed on the states. Everyone assumes that the federal government would need the same amount of the GDP that it has consumed over the last sixty years. The whole point of forcing cuts and limiting the scope of the federal government is to reduce the federal’s need for money by radically reducing what the government does. This would also force the US government to be more agreeable to oil and gas drilling and other uses of our natural resources that generate jobs and revenue. Prohibition would not have been possible without the income tax as some 35% of federal receipts were from liquor taxes.

  18. smitty
    August 2nd, 2011 @ 6:56 am

    I want the federal government to be beholden to states to collect taxes. Otherwise, DC is unanswerable except at election time, which seems to have less effect than it should, AFAICT.

  19. smitty
    August 2nd, 2011 @ 6:58 am

    Keep in mind that, by the Power of Bernanke, DC can inflate the value out of your capital just as easily as taxing. Repealing the 16th is necessary but not sufficient.

  20. Bob Belvedere
    August 2nd, 2011 @ 11:55 am

    -Let’s try and get rid of withholding first.

    Let us all have to write checks every paycheck.

    -How about we make the elimination of withholding part of the BBA?

  21. Ladd Ehlinger Jr.
    August 2nd, 2011 @ 12:45 pm

    Yeah that’s good too.

  22. Ladd Ehlinger Jr.
    August 2nd, 2011 @ 12:48 pm

    What alternate reality do you live in?  

  23. ThePaganTemple
    August 2nd, 2011 @ 1:30 pm

    Because you’d still be collecting for Social Security. It just wouldn’t be run by the government, but by the private sector, albeit with some government oversight to make sure the money was put in good stock. If they’d do this you’d get more returns than you get now, probably one and a half to two percent more. If recipients were all paid a flat amount, with no variations over the years, then it would create a cushion that would keep the system sustainable over the “Bear” years as well as the “Bull” years.

    The best thing about it, the government couldn’t raid it like they have in the past. The governments only power over it would be to make sure crooked Wall Street vultures like Bernie Madoff couldn’t rip it off or abuse it by putting it in shady stock. What it was put in would have to be approved by an oversight committee that would be run with transparency.

    And yes, everybody would have to pay into it the same as they do now.

  24. ThePaganTemple
    August 2nd, 2011 @ 1:50 pm

    There would need to be an exemption for houses, automobiles, Industrial equipment, probably insurance, etc. The only other way it would work is if they had differing rates. Maybe a one percent tax on houses, two percent on autos, etc. Otherwise it would depress those markets, maybe kill them in some areas. Even if it was as low as fifteen percent, then a one hundred thousand dollar house is suddenly $115,000. At 30% you’re looking at $130,000. Unsustainable.

    And of course its going to be a political football. Everything’s going to suddenly become a necessity and a “tax on the poor” and all that crap. The first time I heard this idea floated they tried to get ahead of that by saying it wouldn’t apply to food, clothing, housing, or medicine. By the time they were finished half the economy would either be excluded or taxed at a lower rate.

    I still like the idea of a lower flat tax in combination with an income tax. You could have both and still repeal the 16th Amendment. I don’t guess every law on the book absolutely has to be enshrined in the constitution. That little article in the Fourteenth Amendment Democrats have been flouting lately should be enough to justify collecting taxes if necessary to pay our bills.

  25. Tennwriter
    August 2nd, 2011 @ 2:16 pm

    Mr. Ehlinger,
    Did you support Senator McCain in the last election?  I supported Sarah Palin and voted for Whatshisname.

    Let us use another example: Minimum wage.

    Mention cutting Minimum Wage in some article, and you get tons of R’s out to PJ Media with many good arguements.

    When I see this, I am dismayed.

    Write another article about cutting corporate welfare, or even heaven forbid, the National Science Foundation, and you get less people, but still some good arguements.

    Its the difference between writing a Palin article and some other good piece.  Mention Palin and the rain floods down with great intensity.

    Cutting Minimum Wage is stupid.  My only Talleyrand quote: It was worse than a sin, it was a blunder.

    Now I understand that Cutting Minimum Wage gets many R’s juices going, but this is again, a victory of Emotion over Intellect.  It is also I believe class warfare from the Right.  Tolkien was asked about the Nazi’s being orcs, and he replied that the greater problem was how many orcs we had on our side.

    If you attack Minimum Wage, you’re going to provoke a most heated response from the poor, and they will swamp you like a little rowboat in a hurricane.

    The very last thing we need to do is Cut Minimum Wage.

    Instead, start with the most unpopular cheater at the poker table, and crush them.  That would be Planned Parenthood and the Nat’l Endowment for the Arts.  Snowball your way to something bigger next time.

    Meanwhile attack the most egregiously stupid regulations.   Lather, Wash, Rinse, Repeat.

    Cut taxes.

    Prove your moral courage, and return abortion to the states, and defy the Supreme Court. 

    Close the borders. 

    Finally when the economy is 1)Going great guns 2)You’ve proven over and over that you are trustworthy, and nnot an orc 3)Most folks that had been getting Minimum Wage are now above it…..then launch your educational campaign so that the poor will understand that Minimum Wage is actually  bad for them in a free economy.

  26. ThePaganTemple
    August 2nd, 2011 @ 3:55 pm

    The minimum wage ship has done sailed way past the point of putting it back in port. I agree with you there, any talk of repealing that is moving past stupid into the uncharted territory of batshit insane.

  27. Anonymous
    August 2nd, 2011 @ 7:05 pm

    That would certainly starve the “Beast”.

  28. Bob Belvedere
    August 2nd, 2011 @ 9:19 pm

    Eliminate the 16th and 17th Amendments in a new Amendment that also eliminates The Fed.

    …oh and whack the 19th while we’re at it.