Saturday, October 29, 2005

Ending the income tax

There is a lot of talk about getting rid of the income tax (and presumably Social Security, or payroll, tax as well). I am in favor of this general principle and have read several such proposals in detail, some better than others. WND reports that Sen. Jim DeMint is going to put his proposal to replace the income tax with a sales tax on the Senate floor. This has happened before but it is great that it is happening again. The interesting part of the article is:

Senate staff members tell the paper the 8.5 percent figure had been determined after consultation with economists to assure the proposal would remain revenue-neutral.

I have seen proposals ranging from 12% to 22% but I have never seen a proposal with less than 12% floated by even the most rabid anti-income-tax proponent. This leads me to one of four possible conclusions.

1. The Senator is insane or has consulted only insane economists. I disregard this as unlikely.

2. Everyone else proposing a sales tax is insane or can't do math. I disregard this one too.

3. The Senator is proposing to replace the Income Tax but not the Social Security and Medicaire, etc taxes. If this is the case I am solidly against his proposal.

4. The Senator is really proposing a VAT tax and not just a sales tax. If this is the case I am also against his proposal. The VAT tax in Britain and our northern neighbor Canada is more oppressive to business than our current oppressive income tax system. An 8.5% VAT tax will increase the price of a car by more than 50%.

For those of you not familiar with VAT taxes they tax each transfer of supplies. The cloth companies pay 8.5% when they buy cotton from the farmer. The shirt company pays 8.5% when they buy the cloth from the cloth supplier. The distributor pays 8.5% when he buys the shirt from the shirt maker. The retailer pays 8.5% when they buy the shirt from the distributor. You then pay 8.5% when you buy the shirt from the store. It is one of the reasons that many common items are double the price in England that they are here. It is an even more evil tax than the death tax, in my humble opinion.

Update: It has been pointed out to me that parts of this post are easily read to mean something other than what I meant and that I failed to explain other thoughts that go into the 50% number. I will get back to it and update it soon. You may still disagree but at least the post will then say what I think better.


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