] Opponents say such a system would not be in the best
] interests of the poor and the middle class who would pay
] the same tax rate as the wealthy even though they have
] less disposable income.
I saw this meme floating around last week but I ignored it because I felt it was unlikely to materialize. The President saying "thats interesting" doesn't, in my mind, make it any more realistic that this will happen, but everybody is talking about it, so its worth some commentary.
People, in general, seem to be responding to it very thoughtlessly. "Yeah, get rid of the IRS!" is about as mindless a response as those on the other side who are always screaming bloody murder over "low" corporate taxes without having a basic understanding of how accounting works.
What really bothers me about this proposal is that it seems to be defended with gross generalizations rather then hard data.
Sure, elmininating the income tax code will save some money, but how much exactly? There is a lot more to corporate accounting then income taxes. Its not like the accounting industry goes away. Most of those guys are collecting data for the benefit of investors, not the IRS. Nor is it like the government won't need a revenue organization. We know exactly how much it costs other countries to manage national sales taxes versus their income taxes. Why don't the proponents have this data?
Another assertion is that rich people will pay more taxes because they spend more money. Thats asinine! Any wealthy person who spends a proportionate amount of his income versus someone in the middle class is a fool who will not be wealthy for long!! Where is the data about the change in middle income tax burden? Most western countries have federal sales taxes. The information is available. The fact that advocates of this plan haven't collected it makes me very suspicious.
What this will do is make it really easy to save money for retirement. You no longer need tools like IRAs and 401ks. You can save as much as you want and spend it however you want. There is real freedom in that. Freedom for a Social Security system that is absolutely doomed. Of course, there are middle steps that can be taken toward that, such as raising the bar on Roth IRAs.
The other thing that it will do is make it basically impossible to raise taxes outside of a war context. Today small tax increases can be made in particular areas where political opposition to a tax increase is related to support for the item being funded. Under this system there will be only one tax, and so you've got to get everyone's permission in order to fund any new program. If a new program isn't unanimously loved its not going to run. Period.
Look at Tennessee. They are a sales tax state. Most states with a sales tax have a supplimental source of income, like tourism. Tennessee doesn't. Tennessee has huge revenue problems. They can't raise taxes. They can't afford proper schools. They'd can't afford their medicare program. They've nearly declared bankrupcy recently. They closed all the public parks in the state two years ago.
Thats how we're talking about running the federal government. Sure, its a great way to control government spending, but the results are less then pretty.