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Hugo Papenfus

MAC911

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Tax Systems: Currently we have a mixture of paying tax as you earn and spend.... shouldn't we rather move to pay tax as you spend only?

We have different tax systems over the world, but they mostly tax people on what they earn??? Shouldn't we move to tax systems that tax people only on what they spend? In other words get rid of all other taxes and raise spending taxes like VAT sufficiently. This will have some positive and negative effects. Let's discuss them and see how it weighs up to current tax systems.

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    Aug 19 2011: Another comment by Ryan:

    ".....Lets say that i can build a table in 8 hours, and with the current tax system i have to charge $200 to make a profit and live a sustainable life and that is roughly what people are willing to pay for the table. 20% of that (or $40) goes to taxes leaving me with $160 for supplies, labor, and profit.

    Now lets say the purchaser has to pay all that tax to buy the table, my $200 table just became $240 and people don't want to pay $240 for a table so i can no longer sell them at this price, Now i have to change my price to $160 before the tax to make the total price paid more appealing and the table to be purchasable. The taxes required on the transaction to support the government are still $40, and in order to get that $40 the tax rate on spending must be 25%

    Now everyone's taxes just went up by 25% simply by changing when and how they are paid, instead of paying 20% of income they are paying 25% of purchases, i'd certainly spend less money and that would definitely hurt the people i usually spend my money with, making them much worse off than they currently are....."


    NO......you don't need to pay the VAT at once......The materials bought for the production of the table had VAT, then in selling the table VAT was added again for the pruchaser, so the % can be adjusted because the total VAT that needs to be payd to keep the government budget going can be devided by at least 2, but it should be more since the shop where the materials where bought also got it from somewhere? from the manufacturer/factories of the products...And he got it from the people selling the raw materials for the products....so the shop also paid VAT in the buying of the products?

    So income tax is taken once from a persons income......VAT is taken multiple times of the selling and buying of the same product. governmant can control what can be claimed from VAT just as they control income tax returns......
    • Aug 20 2011: That piece of wood has likely had between 3 and 7 owners before being purchased by the table maker, under our current tax system each one of those owners.. from the tree harvester to each and every middleman and warehouse and wholesale distributors can write their purchase cost and all other business operating costs off and in the end they only pay the 20% tax on their profit, which is calculated post buying and selling where it can be measured accurately either quarterly or annually in the taxes. This allows them the benefit of retrospectively taxing each business based on its profit margins.

      the sales tax would have to be paid at the time of each sale to and from each company involved, well if you took a narrow loss on a product that extra tax you had to pay may make that a huge loss to the point you can't keep your business liquid enough to stay open through the end of the quarter/year where you could in theory get a tax refund from the government.

      Also a thought that just occoured to me is that under such a system every single business and consumer would be required to turn over detailed records of every transaction they make to the government.. that seems like a very intrusive thing to have to give to the government, when currently that is only required on very rare circumstances and only if audited for itemized excemptions for a standard consumer. If i claim a standard deduction on my taxes the government has no right to ask where i spent all my money and i find that thought more pleasant than having to keep detailed records to give them.

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