Less than one week ago, I wrote my husband a letter about what I'd like to see for the future of our country, compared to what I think will really happen. I said at one point that I don't see the US getting rid of the IRS anytime in the near future.
Perhaps I spoke too soon. This made me sit up and gasp.
Posted by Sarah at August 2, 2004 07:20 AMIt's a nice thought--I certainly wouldn't mind not having to file an income tax form each year, but frankly, I'm not such a big fan of this idea.
Consider the following basic fact--the government needs revenue. If it doesn't get it from an income tax, it will get it from somewhere else, either as a national sales tax or a value-added tax. [For example, Great Britain uses the latter--its tax rate is 17.5%, and that's on top of a 22% income tax.]
So, we can get rid of the IRS, but if we want to eliminate income taxes completely, we'll end up with a new sales tax/VAT with a rate most likely between 20 and 30 percent. [If you think that's too high, consider we're running a $450 billion deficit with income taxes at the same rate.]
That means my $80 grocery bill becomes a $100 bill, my $16,000 car becomes a $20,000 car, and my $2.19 a gallon for gas becomes $2.73 a gallon. Over time, that's going to hurt.
Now, I don't know about you, but I also know that I don't pay out 20 to 30 percent of my income in taxes. [I'm just a student.] This means that getting rid of the income tax and imposing a sales tax or VAT means that my taxes will go up, not down. For the most part, this will be a tax on consumption and spending.
Once again, the ultimate net effect of such a plan would be to transfer the tax burden from the wealthiest down to the rest of us.
All in all, it would be a monumentally bad idea--unless, of course, you're a millionaire, in which case it might not be so bad. If we really wanted to reform our system, and make it more equitable to everyone, we'd be much better off lowering the tax rate on wages and salaries and increasing the rates on interest, dividends, and capital gains. [Not that that will ever happen.]
[Also, how would we deal with collecting and transferring the revenue from state to federal government, and who would like to deal with all the bureaucracy involved in those transactions, and in dealing with loopholes, exemptions, and other miscellaneous details that would result from implementing a VAT? You'd still need an IRS-like agency--they just wouldn't necessarily make you fill out a form each year.]
Posted by: Can't win at August 3, 2004 02:05 AM