Quote:
Originally Posted by Fat Charlie
Sales tax- every cashier in the country is a tax collector all year long, and you need to either deal with deductions at the grocery store every week until you max them out or just do it once a year when you file. Every store also needs to account for all these individual collections and forward them to Washington.
Income tax- Every company has someone who handles payroll already. This person handles deductions relatively seamlessly, and you can work on deductions once a year when you file.
Hopefully, most of us will have fewer jobs in the course of a year than we will have interactions with cashiers. That alone makes taxing income more efficient. Aside from the efficiency benefits of collecting tax payments in bulk once a week/month/what have you instead of every time someone in the country buys gum, income taxes have the advantage on not having to be so regressive...
Warren Buffett points out that he pays a lower effective tax rate than his secretary, and also points out that that's a bad thing. Switching from income to sales tax would probably result in him paying an actual lower dollar amount in taxes than his secretary.
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Good point that generally speaking, needing to submit taxes continuously is less efficient than once annually. However, most people already pay a local sales tax, so collecting Federal tax in these areas would be a trivial matter. As an example, gas stations already collect sales tax, both local and federal, and these rates are subject to change independent of each other. The process for collecting sales tax has become (is becoming) trivial. Not only that, but cash sales are nearly gone, and collection of taxes becomes easy when transactions are done electronically. This process can be mostly automated.
As I pointed out, making a sales tax progressive is a simple matter, and finding tax loopholes for the wealthy becomes impossible. The wealthy would pay more in taxes both as a percentage of income, and in real terms. There would be no tax loopholes to exploit. Since wealthy people spend more money than poorer people, they would pay more tax.
As an example of a tax loophole, a friend of mine pays his children to do chores. That money is not taxed because it is a business expenditure (all perfectly legal, too). Since he is the custodian of his children's wealth, it is his discretion on where it ultimately goes.
If Buffett pays a lower effective tax rate (which I highly doubt), it's only due to his exploitation of legal means of avoiding and deferring tax payments to the government. Had his secretary been as prudent as he, they would be paying a lower effective tax due to their lower income.
Counting how many useful eyes or appendages we have and applying a deduction is absurd. Maybe everyone who grew up in a single parent family should get a deduction, since that's one of the biggest predictors of financial (and life) success.
The point is, those that spend more money will be taxed more, it will be fair, and it nearly eliminates corruption, special interests, and lobbying. Considering the vast majority of people get a tax refund, freeing up those overpayments by not charging them in the first place gives them more purchasing power throughout the year.