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Old October 13th, 2011, 11:45 AM   #2
Mr. Special Snowflake.
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If you're one of the people that think that one of our biggest problems is that poor people do not pay enough in taxes and wealthy people pay too much you should love this plan. Sales taxes tend to be regressive, since people at the lower end of the income range end up spending a higher percentage of what they make just to survive and don't have as much left to save or invest. I haven't heard if food or other necessities would be exempt. If so it would help the poor, but would turn it into a middle class tax. The higher you went in income the less of your total wealth would be paid into it.

The 9% flat income tax would mean a reduction in spending power by those that currently don't earn enough to pay taxes. Some of this would offset by the elimination of payroll taxes. Payroll taxes are currently 5.65% for employees (will go to 7.65% if tax breaks are not renewed) and 7.65% for employers. The end result would depend on if employers shares any of the savings with employees. In general it looks like most of the upper half of wage earners would see a reduction in taxes while the lower half would see an increase.

I'm not sure what effect the elimination of most tax breaks would have.

It would mean a huge reduction in taxes for the wealthy. The combination of a reduction in income tax, elimination of capital gains tax, and reduction of business taxes would mean big savings for the wealth. The rich will certainly get richer under this plan, the poor will certainly get poorer.

Any savings seen from the simplification of the income tax code would likely be more than completely consumed by the new infrastructure and bureaucracy that would go into collecting the new national sales tax, so that would be a net loss.

I don't see how the big reduction in income tax, the elimination of the capital gains tax, the elimination of the payroll tax and the reduction of the business taxes can be made up with a 9% sales tax.

It sounds like a bad plan to me. I hope it never passes.
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