The various loopholes and deductions that can be found sometimes significantly reduce taxes-paid. since the wealthy pay more taxes, they have more of an incentive to find such reductions where they can. In extreme cases, this can make the current U.S. tax system non-progressive, but I doubt that it can make it regressive--the middle class still pays a larger percentage of income in taxes than does the lower class.
The problem with a national sales tax, even with exemptions, is that it creates a distortion in the market. The tax increases prices seen by the consumer, messing up the market equilibrium. The increased real price decreases the quantity purchased by consumers, harming businesses and actually decreasing income. The effect of a sales tax is a dead-weight loss in the economy, a market imperfection that hurts both consumers and producers.
Taxation of manufacturing, software creation, and even income when used for revenue purposes are really just a second best option. Politicians lose votes when they set up taxes that directly effect their constituents, so they try to get around the people by using indirect taxes like those placed on the production process or by making the voter think someone else is being taxed more than they are (the rich really are the only ones paying the income tax, right?).
A better option would be to tax the people using state resources. A tax on gasoline that reflected the real public cost of driving a car (road construction and upkeep, pollution, etc) would help pay for transport improvements. A usage fee for public libraries would help defray their cost. Obviously in a real world situation this must be supplimented with an income tax or other form of state revenue in order to make necessary services available to those who can not afford them, but such taxation must be seen for what it really is: income redistribution.
Unlike income tax, which is (distortedly) proportional to your earnings, sales tax is a flat rate.
Though the example given is correct ($6.50 in tax hurts someone with a lower income more than one with a higher income), what is being described is a regressive tax, not a flat one.
To clarify: The current personal income tax is progressive because the proportion that one is taxed increases as income increases. Sales tax is regressive because the proportion of ones income that is taxed decreases as income increases. This is because a poorer person spends a larger percentage of income on items that are taxed, such as clothing and food (that is not classified as a 'staple' good), than a wealthier person. A flat tax would be one in which everyone paid the same percentage (not amount) of their income in tax.
Sales tax makes sense for governments that do not have the resources necessary to enforce an income tax. It's also easier to increase a sales tax by half a percent than it is an income tax when it comes to voters, as it's harder to estimate the real effect of a sales tax on an individual.
Having interned at a Congressional office, I may be a little cynical at estimating the probablility of actually influencing a Congressman's vote by calling him/her (slim to none). But, here are some tricks I learned while I was there:
Before calling, read the bill (or at least the CRS summary - see below) and know if the Congressman is sponsoring the bill.
Staff members use Thomas, a database by the Congressional Research Service, to find out what the bill actually does. Pick a few specific points from the summary (H.R. 1542 summary) that you have a problem with; be informative and able explain why the bill will harm the Congressman's constituents.
Call the DC office, not the district office. Make sure the caller id information shows an area code that is in the Congressman's district.
When calling, be polite and friendly. Ask to speak to the staff member that is working on the Tauzin-Dingell Broadband Deployment Act. It will probably be the staffer that works with technology or communications. Do not just start talking about the bill to whoever answers the phone, he or she is probably not the one with the answers.
Be short and to the point. Don't expect any direct answers to questions if the answers are likely to conflict with your opinions.
If your Congressman is one of the 112 co-sponsors of the bill, ask why. Politely.
No matter what the outcome of the call, thank the staff member for his or her time.
CRS reports are compiled by researchers in the Library of Congress and are the main source of information for Congressional staffers. Most are available from 3rd parties; some are online. Rather dull reading, but it helps to know what information the people making the decisions are using.
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The various loopholes and deductions that can be found sometimes significantly reduce taxes-paid. since the wealthy pay more taxes, they have more of an incentive to find such reductions where they can. In extreme cases, this can make the current U.S. tax system non-progressive, but I doubt that it can make it regressive--the middle class still pays a larger percentage of income in taxes than does the lower class.
The problem with a national sales tax, even with exemptions, is that it creates a distortion in the market. The tax increases prices seen by the consumer, messing up the market equilibrium. The increased real price decreases the quantity purchased by consumers, harming businesses and actually decreasing income. The effect of a sales tax is a dead-weight loss in the economy, a market imperfection that hurts both consumers and producers.
Taxation of manufacturing, software creation, and even income when used for revenue purposes are really just a second best option. Politicians lose votes when they set up taxes that directly effect their constituents, so they try to get around the people by using indirect taxes like those placed on the production process or by making the voter think someone else is being taxed more than they are (the rich really are the only ones paying the income tax, right?).
A better option would be to tax the people using state resources. A tax on gasoline that reflected the real public cost of driving a car (road construction and upkeep, pollution, etc) would help pay for transport improvements. A usage fee for public libraries would help defray their cost. Obviously in a real world situation this must be supplimented with an income tax or other form of state revenue in order to make necessary services available to those who can not afford them, but such taxation must be seen for what it really is: income redistribution.
Though the example given is correct ($6.50 in tax hurts someone with a lower income more than one with a higher income), what is being described is a regressive tax, not a flat one.
To clarify: The current personal income tax is progressive because the proportion that one is taxed increases as income increases. Sales tax is regressive because the proportion of ones income that is taxed decreases as income increases. This is because a poorer person spends a larger percentage of income on items that are taxed, such as clothing and food (that is not classified as a 'staple' good), than a wealthier person. A flat tax would be one in which everyone paid the same percentage (not amount) of their income in tax.
Sales tax makes sense for governments that do not have the resources necessary to enforce an income tax. It's also easier to increase a sales tax by half a percent than it is an income tax when it comes to voters, as it's harder to estimate the real effect of a sales tax on an individual.
- Before calling, read the bill (or at least the CRS summary - see below) and know if the Congressman is sponsoring the bill.
- Staff members use Thomas, a database by the Congressional Research Service, to find out what the bill actually does. Pick a few specific points from the summary (H.R. 1542 summary) that you have a problem with; be informative and able explain why the bill will harm the Congressman's constituents.
- Call the DC office, not the district office. Make sure the caller id information shows an area code that is in the Congressman's district.
- When calling, be polite and friendly. Ask to speak to the staff member that is working on the Tauzin-Dingell Broadband Deployment Act. It will probably be the staffer that works with technology or communications. Do not just start talking about the bill to whoever answers the phone, he or she is probably not the one with the answers.
- Be short and to the point. Don't expect any direct answers to questions if the answers are likely to conflict with your opinions.
- If your Congressman is one of the 112 co-sponsors of the bill, ask why. Politely.
- No matter what the outcome of the call, thank the staff member for his or her time.
CRS reports are compiled by researchers in the Library of Congress and are the main source of information for Congressional staffers. Most are available from 3rd parties; some are online. Rather dull reading, but it helps to know what information the people making the decisions are using.