Friday, November 4, 2011
As promised, I'm going to tackle the monster that is our tax code. Firstly, let's establish that I am NOT a tax lawyer, accountant, or economist. Simply an average American who is pretty disgusted by our elected officials and the status quo.
National Sales Tax
Let's face it. We pay taxes. We pay income tax, excise tax, sales tax, dividend tax, and probably several others that are buried in the huge volumes of our national tax code. I'll open this blog entry with the footnote that taxes make our country go 'round. But taxing the populous unfairly creates animosity, hampers economic growth, and frankly ticks people off. Yet taxes are one of the largest dividers in our government today. If the media hype is to be believed, then Democrats say "raise taxes on the rich" and the Republicans say "don't raise taxes on the rich". Rich or poor taxes are a part of our life as Americans, accept it and move on.
Sales tax, the topic of this little rant, in its simplest explantion is a tax on all goods purchased by you the consumer. I don't think I have to delve into this definition too much so I'll continue. If you look at sales tax rates, by state, you might be surprised at what you pay at the STATE level. States such as Delaware and Alaska have no state sales tax on goods such as groceries, prepared food, prescription drugs, non-prescription drugs, and clothing. Also remember, many counties and cities impose sales tax on goods purchased within their zones of control. For the example in this entry, I'll use Missouri, as that is my current residence. Missouri imposes a state sales tax of 4.225%. On top of this, the city of St. Robert, in Pulaski County has a sales tax of .75% (county and local sales tax combined). This produces a total of 4.975% sales tax on most goods purchased at let's say Wal-Mart. Exemptions exist for certain items, but I refuse to enumerate them here as I feel that would make my "tax proposal" much more confusing, and that is one of the problems we face now. Using this rate, if I purchase an item for $100 at my local store, I pay $4.97 in state and local sales tax. This tax, once collected, is sent to the state where the state of Missouri takes its 4.225% and sends the remaining .75% back to the city/county. Fairly simple, right. Now, for a comparison, let's look at Coffeyville, Montgomery County, Kansas. Kansas state sales tax rate sits at 6.3% with the local sales tax in Coffeyville adding on an additional 3%. That same $100 item in Coffeyville, Ks will cost you $109.30 vs $104.97 in St. Robert, Mo. This isn't an enourmous amount of money, but if you multiply this difference by the $18,000 a year the average adult American spends, this is a nice chunk of change. State and local sales tax is not the target of this proposal, states retain the right to regulate commerce within their borders as stated in the Constitution (remember that document that made us the nation we are today? You know, the one our current politicians bend, twist, and disregard to suit their own needs?)
It is important to note that some organizations that are listed as "non-profit", or "charitable" are exempt from these sales taxes. Churches also have a certain degree of immunity from sales tax. With a National Sales Tax, of $.01 per dollar, these "non-profits" would NOT be exempt from this tax. Now, before I get burned at the stake for this statement, understand my point of view. Non-profit/charitable/church organizations receive donations (tax free) from contributors. This revenue goes to the maintenance of these organizations and their facilities. Purchases by these organizations (lumber for new buildings, paper for offices, printer ink, etc) have nothing to do with the stated mission of each organization. These goods are produced by companies that do not specify "for non-profit use only" on their products. Example: I buy a package of printer ink to print coupons at my house (nod to my lovely wife). While I'm in the store, the person next to me is purchasing the exact same printer ink, which will be used for printing flyers for a non-profit organization. Is the printer ink any different, nope. Will the ink be used for something other than printing, probably not. It is a consumable product and should be subject to the National Sales Tax. If the states and localities wish to make it exempt from their taxes, by all means do so. They have that right. Non-profits aside, let's look at the revenue generated from a single penny National Sales Tax.
Bobby Smith (no one sue me for using this name) is a middle class factory worker. He purchases $100 a week in groceries for his family. (Numbers are general/easy math numbers not an actual budget). That $100 a week generates $1 in income for the country. In a full year, Bobby Smith will contribute a grand sum total of $52 to the national kitty. (52 weeks in a year for those who need the explanation). On the other side of the coin, Randolph Gotthemoney is a stock broker with a six-figure income and spends $1000 a week for high-end meals at his Manhattan penthouse. Randolph contributes $520 to the national kitty a year. Still not a lot of money for someone in his position. Both the middle class factory worker and the upper class stock broker have both paid this tax. It has removed economic status and loopholes and generated income from both. On a larger scale, those who spend more money on high-end items pay more in taxes while those frugal shoppers on the other end of the spectrum pay less.
Some figures to look consider: (All figures are approximate)
The average adult American spends $18,000 a year on various items (food, clothing, etc.)
In 2010, there were roughly 220,000,000 adult Americans in the nation.
This translates into $3,960,000,000,000 in spending by consumers.
The $.01 National Sales Tax would have produced roughly $39,600,000,000 in revenue.
This revenue would have covered the entire budget of a few federal agencies:
$26.3 billion – Department of Energy
$26.0 billion – Department of Agriculture
$23.9 billion – Department of Justice
$18.7 billion – National Aeronautics and Space Administration
$13.8 billion – Department of Commerce
$13.3 billion – Department of Labor
$13.3 billion – Department of the Treasury
$12.0 billion – Department of the Interior
$10.5 billion – Environmental Protection Agency
$9.7 billion – Social Security Administration
$7.0 billion – National Science Foundation
$5.1 billion – Corps of Engineers
$1.1 billion – Corporation for National and Community Service
$0.7 billion – Small Business Administration
$0.6 billion – General Services Administration
National Sales Tax
Let's face it. We pay taxes. We pay income tax, excise tax, sales tax, dividend tax, and probably several others that are buried in the huge volumes of our national tax code. I'll open this blog entry with the footnote that taxes make our country go 'round. But taxing the populous unfairly creates animosity, hampers economic growth, and frankly ticks people off. Yet taxes are one of the largest dividers in our government today. If the media hype is to be believed, then Democrats say "raise taxes on the rich" and the Republicans say "don't raise taxes on the rich". Rich or poor taxes are a part of our life as Americans, accept it and move on.
Sales tax, the topic of this little rant, in its simplest explantion is a tax on all goods purchased by you the consumer. I don't think I have to delve into this definition too much so I'll continue. If you look at sales tax rates, by state, you might be surprised at what you pay at the STATE level. States such as Delaware and Alaska have no state sales tax on goods such as groceries, prepared food, prescription drugs, non-prescription drugs, and clothing. Also remember, many counties and cities impose sales tax on goods purchased within their zones of control. For the example in this entry, I'll use Missouri, as that is my current residence. Missouri imposes a state sales tax of 4.225%. On top of this, the city of St. Robert, in Pulaski County has a sales tax of .75% (county and local sales tax combined). This produces a total of 4.975% sales tax on most goods purchased at let's say Wal-Mart. Exemptions exist for certain items, but I refuse to enumerate them here as I feel that would make my "tax proposal" much more confusing, and that is one of the problems we face now. Using this rate, if I purchase an item for $100 at my local store, I pay $4.97 in state and local sales tax. This tax, once collected, is sent to the state where the state of Missouri takes its 4.225% and sends the remaining .75% back to the city/county. Fairly simple, right. Now, for a comparison, let's look at Coffeyville, Montgomery County, Kansas. Kansas state sales tax rate sits at 6.3% with the local sales tax in Coffeyville adding on an additional 3%. That same $100 item in Coffeyville, Ks will cost you $109.30 vs $104.97 in St. Robert, Mo. This isn't an enourmous amount of money, but if you multiply this difference by the $18,000 a year the average adult American spends, this is a nice chunk of change. State and local sales tax is not the target of this proposal, states retain the right to regulate commerce within their borders as stated in the Constitution (remember that document that made us the nation we are today? You know, the one our current politicians bend, twist, and disregard to suit their own needs?)
It is important to note that some organizations that are listed as "non-profit", or "charitable" are exempt from these sales taxes. Churches also have a certain degree of immunity from sales tax. With a National Sales Tax, of $.01 per dollar, these "non-profits" would NOT be exempt from this tax. Now, before I get burned at the stake for this statement, understand my point of view. Non-profit/charitable/church organizations receive donations (tax free) from contributors. This revenue goes to the maintenance of these organizations and their facilities. Purchases by these organizations (lumber for new buildings, paper for offices, printer ink, etc) have nothing to do with the stated mission of each organization. These goods are produced by companies that do not specify "for non-profit use only" on their products. Example: I buy a package of printer ink to print coupons at my house (nod to my lovely wife). While I'm in the store, the person next to me is purchasing the exact same printer ink, which will be used for printing flyers for a non-profit organization. Is the printer ink any different, nope. Will the ink be used for something other than printing, probably not. It is a consumable product and should be subject to the National Sales Tax. If the states and localities wish to make it exempt from their taxes, by all means do so. They have that right. Non-profits aside, let's look at the revenue generated from a single penny National Sales Tax.
Bobby Smith (no one sue me for using this name) is a middle class factory worker. He purchases $100 a week in groceries for his family. (Numbers are general/easy math numbers not an actual budget). That $100 a week generates $1 in income for the country. In a full year, Bobby Smith will contribute a grand sum total of $52 to the national kitty. (52 weeks in a year for those who need the explanation). On the other side of the coin, Randolph Gotthemoney is a stock broker with a six-figure income and spends $1000 a week for high-end meals at his Manhattan penthouse. Randolph contributes $520 to the national kitty a year. Still not a lot of money for someone in his position. Both the middle class factory worker and the upper class stock broker have both paid this tax. It has removed economic status and loopholes and generated income from both. On a larger scale, those who spend more money on high-end items pay more in taxes while those frugal shoppers on the other end of the spectrum pay less.
Some figures to look consider: (All figures are approximate)
The average adult American spends $18,000 a year on various items (food, clothing, etc.)
In 2010, there were roughly 220,000,000 adult Americans in the nation.
This translates into $3,960,000,000,000 in spending by consumers.
The $.01 National Sales Tax would have produced roughly $39,600,000,000 in revenue.
This revenue would have covered the entire budget of a few federal agencies:
Something to think about....
More to follow....
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