Tuesday, October 11, 2011

Sadie Frown for A 9% Federal Sales Tax

I don't right about politics too often on my blog but this is just mind boggling to me:

I can't imagine people anywhere being happy about a 9% federal sales tax (or that they'll vote for someone who makes it a basic part of his plan for our nation).  Does that mean that people in states like California where the sales tax (with the regional sales tax included) is often over 8% would be paying over 17% in taxes on each purchase?

I can't imagine the states giving up their own sales taxes if the feds added on theirs.  I know that we struggle to make ends meet as it is and a 9% increase on pretty much everything would definitely effect us dramatically.  Who would imagine that a 9% increase on items would jump start the economy and get people to pull out their pocket books more often?

And a republican is the one proposing it as the solution to all of our problems?  I can tell you I won't be voting for anyone who takes this idea and runs with it...

I don't know about you, but I think a 9% federal sales tax would be a very bad thing for our economy.  Would it effect your spending?  I imagine it would make life pretty difficult for a large number of people in our country...

I truly doubt it will ever be a reality, and using it as a platform to run on just seems bizarre to me....


  1. Well, as far as I understand (and I'm not very educated regarding economics) income taxes would be eliminated which would help compensate?

    This link has some deeper discussion on the issue by people much smarter than me, if it's helpful.

  2. Yeah... it isn't what one calls an "Additional" tax, but would eliminate Fed income tax (right now about 33-36%).

  3. I'm afraid I can't feel too badly about a 9% federal sales. I'm already paying 13% up here, on my taxes.

    Unfortunately, taxation is a necessary part of government. Without taxation, government has no money to fund it's various services and programs.

    I could get really far into this (and have, in the past), but I think the solution to the American debt problem is to slash spending in ALL departments and increase taxation. This is similar to suggestions I have for our own national debt up here in the Great White North.

  4. Thanks for the link JoAnna! I guess I don't understand the difference between an "income tax" and a "personal income tax" because there would be "personal income tax" at 9%, which would lower taxes for the rich and raise them for the poor (from what I've read, and I'll admit, this is over my head...). It does seem like it would help some people... but I have a feeling it would hurt those just getting by pretty badly too.

    I mean, I understand the logic that the rich would have more money to invest and so they'd spend more, but we didn't really see that play out with the stimulus. I just remember when they kept showing CEOs on the news and were asking them why they weren't using the money that they had and they kept coming up with excuses about "seeing how things were going to go"... It definitely didn't seem like much was trickling down the way they planned.

    I understand offering incentives to businesses to create new jobs. I'm just not sure dropping the level income tax of the rich, while forcing everyone to pay a lot to buy pretty much anything is the way to get around to it.

    I guess I just don't understand how it could possibly be a good idea, although there certainly people who do.

    Maybe if I had a little more money I would appreciate it more!

    Thank you for the link because it is just so confusing! I'm sure we'll hear more about it!

  5. Hi Zach-

    But it would be on top of what we're already paying. In Calfornia that's between around 8 percent up to around 10 perfect, which means people would be paying upwards of 17 percent on each purchase. And we don't even have the excuse of socialized medicine that you guys have :0).

    I just have a feeling this would create a huge black market and barter scene (the barter part wouldn't be bad) here in the US.

    It would mean we were paying about 16% where we are now... And I really can't imagine even barely making ends meet paying that much more on each purchase...

  6. I would assume (based on my limited knowledge of politics), that if this idea came from a Republican it is most likely to replace income taxes (as the first commenter stated). The problem that some people may not realize though is that although eliminating income taxes sounds like a good idea, many people (especially those that are poor and in the lowest tax brackets) would be GREATLY affected by this.

    Many people with families that make such little amounts of money don't even pay taxes because of regular exemptions and deductions and in some cases those with children get additional money back from "tax credits" on the 1040 on top of not paying anything.

    So this would essentially take money away from those that need it and don't currently pay anything or pay less than this already. I used to think that eliminating income taxes and just having sales tax would solve everything, until I realized how taxes really worked and who really pays (currently).

  7. Hi Joseph-

    Hopefully you understand this better than I do... would that mean an increase for those at the bottom, who usually end up getting everything refunded after deductions, and a decrease for most people who actually make enough to pay?

  8. Hi Laura-

    That's kind of how I understand it too. I know for us it would mean going from "not quite getting by" to "there's no way we're going to be able to pay our bills."

    It's only been a little over a year since we've had indoor plumbing... but I kind of like it... This would pretty much ruin us...

  9. Hi Cam -

    I must have missed that part of your post. Still, 17% isn't horrible. I've gone as high as 16% in the past. Still, the US income taxes are a lot higher too, aren't they?

    Come to think of it, the US really doesn't have a decent excuse for such an outrageous budgetary shortfall. You don't even have basic medical care down there, from the sounds of things!

  10. Theoretically there are three kinds of tax: Progressive, Fair, and Regressive. Progressive means greater burden as you go up the pay scale, Regressive is greater burden as you go down the scale, and Fair is, well, fair to all. In practice I know that pro- and re-gressive taxes exist. Fair is difficult because it is trying to balance a subjective equation.

    Sales tax is generally considered regressive. This is because of reasons you cited. Low income families have to spend a larger portion of their budget, and rarely have much disposable income to take on the extra burden. Meanwhile higher income families may pay more tax dollars, but it would be a smaller portion of their basic living expenses.

    Efforts are made to try and balance this. For example, some states exempt groceries, medicine, and utilities. This is so the sales tax makes the family decide if they can afford a kind of TV, or mattress, or shoes, and so on, but not whether or not they can eat and have running water and electricity.

    The other two 9s in his 9-9-9 plan (income and business) are supposed to be fair bordering on progressive, but that would depend on what his "empowerment zones" which have exemptions in them are.

    All of this economic theory crafting and 'black magic' gives me a headache. But the current system needs an overhaul and soon.

  11. as I understand it the 9% income tax would be only on the amount you make over a certain percentage above the poverty level, so if you are poor, you will continue to not pay income tax. We make around the national median income and get more back than we pay because we have kids and likely we would pay more in that plan but not an unreasonable amount. As to the sales tax, not sure if it would replace state sales tax but it would not be on food, which is my big gripe. In my state we pay tax on food. So for me it would be 14% on non foods. I guess I figure I could handle that and it does at least tax the rich more than the poor or at least the materialistic more than the ascetic? If it would make the economy more stable, my husband might eventually get a raise and so I would be willing so suffer a little for long term gain. The thing with your family is that as tight as your money is, once your husband graduates and gets a job as a lawyer, you will be one of those upper middle class people who never worry about affording stuff as petty as a 17% sales tax.(not that it changes whether the tax is just)

  12. Interesting. I think it depends on what the sales tax applies to. The main things that everyone "needs" are food and gas/oil (in people that have oil heat)/electricity. Sales tax doesn't generally apply to food (at least it hasn't in any state I've lived in..not real food anyway..maybe things like candy or soda, but not actual "food"). It has applied to oil/fuel/electricity so in that sense it could be very bad for poor people. But, usually sales tax applies to "stuff" and really most people could get by with a lot less 'stuff"...(even things like clothes, which are necessary) Most people could also get by with using less gas/oil/electricity as well, although we do need it. Presumably rich people would buy more stuff and buy more expensive stuff so they would pay more taxes than poor people who should buy less stuff and less expensive stuff. I have no problem with non-necessities being taxed at a higher rate. Right now we are poor, but in a few years, I expect to be middle-class, and I actually like the idea of being able to keep more of our money and pay less taxes if we simply buy less stuff. It seems as though having sales tax instead of income tax would give people more control over how much tax they pay. If you want to pay less tax, buy less stuff (or less expensive stuff). I know what it's like to be poor and no tax. In fact, last year we paid zero taxes and actually got money back on our taxes for nothing more than existing and having children. While it was nice, I don't think we "deserved" that really. I mean, we still use roads and benefit form law enforcement and all those things that our taxes pay for. I'm not necessarily in favor of this plan, but nor am I against it. I would need to look into it. However, on the surface, it seems as though it gives the individual more control over how much tax they pay and generally I'm in favor of more control on an individual level and less on a governmental level.

  13. Those antibiotics either have kicked in and you are feeling well enough for a "blog-fight", or you sure do get feisty when you don't feel up to snuff! :) You posted only a couple hours ago, so I figured I would be the first to comment, but NO... I'm far behind on this one.

    When I vote, I first & foremost consider a candidate's position of LIFE issues. If a person cannot think & act logically & morally on the most basic issue of right to life, then that person will not garner my support regardless of any other issue.

    Please check out the link below and reconsider...


  14. Cam, you are right. While the 9% income tax might help those at the lower end, (those who are not quite poor enough and still pay taxes) it doesn't help those at the very bottom, who often receive money that they didn't even pay in.

    A flat sales tax however, is a regressive tax, which means it disproportionately affects the poor. 9% on a gallon of gas is a lot bigger percentage on a poor person's income, than a wealthier person. Lets do the math. Gas in my area is $3.49 and lets say you have a 15 gallon tank. This means you just spent $52.35 on a tank of gas without taxes. With a 9% federal tax, that means you just spent $57.06 on a tank of Gas. You just had to pay an extra 4+ dollars on federal sales tax. This of course is on top of gas tax that states already impose. This $4 is a lot more burdensome to a poor person than a rich and is a bigger percentage of the poor persons income.

  15. Oh, I also meant to talk about the 9% corporate tax. Without more details it is hard to know what he is specifically referring to, because this would be a huge reduction in corporate taxes. Right now corporations are subject to double tax system. The corporation is subject to tax and then most distributions (including dividends) are subject to a 15% additional tax. In essence the same money is taxed twice. So I would want to know if he is planning on abolishing the double tax system as well as lowering tax rates? While I generally support reducing corporate taxes a little, I just don't see how the budget and deficit could bear such a reduction in tax revenue especially since the savings from the lower tax rate won't be passed onto the consumer.

  16. Hi Cliff-

    I think I do get feisty!

    I do consider life issues first. But they aren't the only thing I consider. And this would literally hurt us so badly on the business end that it would be an issue of "life" for us. With what I make now it's a rice and beans budget. And every single thing I make is considered a "luxury." As it was I paid the state sales tax for my store out of pocket...

    Thankfully he's not the only pro-life choice. If he were that would be different...

    I will reconsider my position on voting for him if he reconsiders his position on this tax!

  17. Maybe I'm totally missing something, but I thought the 999 plan was supposed to *replace* what is currently happening...so the 9% would not be in addition to what you're paying now, but it would replace what you're paying now. If you currently pay 8% sales tax, that will get replaced with 9%. If you currently pay 12%, you'll now pay 9%. It's an "all-over-the-country-it's-the-same" kind of thing.

  18. Oh wow! I hope that's right! I just couldn't imagine the states giving up their cut of the sales tax. That would really change what I thought about the plan! I mean, 9% is reasonable. On top of the state's taxes it would just be insane. I haven't seen that anywhere though. And would the federal government be able to force the states to give up the tax? I just kind of thought that was one of those "left to the states" things?

  19. One more thing...I have to say I agree with Cliff - first issue I look at is the pro-life issue. If a candidate isn't *totally* pro-life, they don't get my vote.

  20. No, it replaces it at a federal level. The states still levy taxes sovereign to the federal government, as is proper.

    Not all states have sales tax though.

  21. http://www.hermancain.com/999plan

    Scroll down to the Phase I - 999 section. It looks like the 9% is *replacing* what we currently have (not adding to it).

  22. I don't understand how someone, especially a Christian, could look at Cam's family and consider all the facts and conclude that this plan is worth supporting. Never mind that families like Cam's would be impossible to sustain (if you consider the current state of praying not to have to go use medical care as sustaining), not all have someone on the verge of a good job and any benefits to you would be pretty much inconsequential.

    Is the difference between living well and living slightly-better-than-well really worth hurting other families like that and is that something we as Christians should condone?

    Here's more info on the plan:
    The Cain campaign has not released the nitty-gritty details of his plan, but according to his website, it is actually a three-step process. The 9-9-9 part of the plan is merely an intermediate second step in instituting a Fair Tax, which would replace all federal taxes with a 30 percent national sales tax.

  23. As far as I can tell, Santorum is your only other good pro-life candidate. Also, have you heard Cain speaking? Wouldn't it just be delicious to see him and the BO go head to head in a no holds barred debate?

  24. Thanks Nicole. :)

    Here are a few other scattered thoughts:

    I have to add that I only vote for Pro-Life candidates. That does come first. So if Cain goes up against Obama as the Republican nominee I would vote for him. I just really hope (and doubt) that that won't happen.

    I would be thrilled to see Santorum as the candidate, although I'd be kind of surprised if that became a reality too.

    I thought basically what the Baron pointed out above was true... that sales tax would be a states' right. I can't imagine what would happen to California without a state sales tax. It would implode. The state barely gets by year to year as it is. I don't think it's a stretch to say that the infrastructure would collapse. People would be expected to go to work (those lucky enough to keep their jobs) but would also be expected to accept "rain checks"... we've seen that before in CA and that was with the sales tax.

    They almost took the license tax away from law enforcement this last year and our county would have literally lost more money than the entire combined salaries of all the entire sheriff's department. It was a very disturbing idea.

    I just can't imagine how it wouldn't destroy quite a few states fiscally.

    If there's one thing I remember from my almost useless poli-sci degree it's that state's rights were pretty huge when they were writing the constitution. And I'd be surprised if constitutionally the federal government could tell the states that they couldn't collect sales tax...

    Just some things to think about. I don't pretend to know everything there is to know about this. And I'm still forming my opinion about this. I just don't really see how it could work.

    And I had seen the quotes of it being a "teaser rate" that would go to 25-30% after a short period of time. To me that sounds like a nightmare.

  25. I feel like somehow Nicole's comment was directed at me, and if so, I find her characterization of me unfair. If not, I apologize for assuming such. First of all, I don't support any plan, I don't know enough about it. Second of all, I would not support a plan which puts high taxes on necessities like food, gas and utilities. Third of all, I obviously do not want to hurt anyone's family and to imply that I have this callous attitude is incorrect and unfair. Fourth of all, my point of view is that of a current poor person who pays no taxes (but former middle class person who has had income taxed away) who currently (due to the fact of being poor) does not consume/buy things that much of America does and will likely continue to under consume (compared to much of America) even when we get more income (which is a few years away).

    I will admit that I hadn't thought of it from the viewpoint of a small business owner who sells actual goods. I am also a WAHM, but I don't sell anything, so I will admit I don't know how this tax would affect a small business that sell goods. I think the theory is that if people had more discretionary income they would buy more things and be willing to pay more (including the increased tax rate), but I'm not sure if that actually happens. So, I would not be in favor of a plan that would majorly hurt small business as I generally like to support small business.

  26. Hi Amelia-

    You definitely made some great points in both your posts which had me thinking. I think I generally don't notice what is taxed and what isn't when we buy things at the store, so I hadn't thought of that angle until I read your earlier post.

    I keep telling DH that I think I'll probably continue to clip coupons and cut costs even if (and hopefully when) our income increases in the far off future. I think the main change for the moment would be our diets. More fresh fruit and veggies would be the main thing and of course, as you pointed out, that shouldn't be taxed.

    I keep brainstorming ideas for a balcony garden, but I don't trust the girls not to destroy it quite yet (Mae Bae particularly). I did see an interesting garden on one of the other balconies with bungy cords.

    I wonder about the gas part too. It's hard to find any actual hard facts about what in reality would happen... But this discussion has given me a lot to think about on both sides and all the comments have helped me to look at the issue in different lights. It's definitely more complex than I thought when I first glanced at it, although I still don't see it as feasible!

  27. The FairTax proposal, which the 999 plan is supposed to be a transition towards, sets the sales tax at 23%, but a) does away with all other federal taxes and b) includes a monthly tax rebate based on family size that's supposed to cover all tax expenses on purchases up to the poverty level. The basic idea is to tax consumption instead of income.

    That said, the candidate in question hasn't mentioned any of these details. If he truly does intend to implement something like the FairTax but without the monthly rebate, then the plan is insane. If not, he needs to work on explaining his ideas better.

  28. Well consider this. The 9% Federal sales tax isn't on everything. It doesn't apply to anything used, such as a used car, or boat, or used appliances, furniture, clothing etc.... So people living at the poverty level would pay no more than they do now, if they bought something used. Also, while simplifying the tax code for Federal income taxes at a straight across 9%, people that normally get a tax refund will continue to get it.
    Here in Florida we pay 6% sales tax, ($6 per %100 spent) so with the addition Federal Tax we would pay $15 per $100 spent. The wealthier people that can afford a new car or new house or new boat etc., will pay the additional 9% on their purchases. People that deal in cash only that aren't paying any taxes for example, drug dealers, illegal aliens, will now contribute based on what they buy, cars, jewelry, booze, airline tickets, motel/hotel rooms etc. Now lets look at the alternative. If you have a student in 9th grade now, (under the new tax laws put in place by the Obama administration that take effect Jan. 2012 and 2013-2019) your 9th grade student will be paying close to 56% income tax when they finish college and get their first job. 56 cents out of every Dollar they make will go to pay off the 16 trillion we as tax payers owe today. We currently don't tax any imports to this country. But our manufacture's are taxed for exporting their goods to other countries. They are actually hit 3 times in taxes. Once by our own government in the manufacturing process, once by the government that they export to, and then again by our country for the money they make on the goods sold over seas. That is why manufacturing jobs are leaving this country. If we would start taxing the countries that import their goods here, such as China, India, Saudi Arabia, Brazil, Venezuela, Indonesia,
    the Growing Trillion dollars deficit would be paid off in 8 years, with out raising anyone's taxes or cutting anyone benefits, plus we would have a surplus again. By cutting the taxes the government places on manufacturing in this country, and cutting the taxes on Corporate profits, this country could become the industrial giant we once were, with a blossoming economy. There would be many more jobs, and the 6 million immigrants that are waiting to enter the country legally would be able to do so which would boost the tax rolls, and the housing market, and construction industry. Herman Cain's 9-9-9 plan is the best plan because it includes collecting the import tariffs, re-evaluating foreign aid, and securing the border. Romney has a similar plan, but it is very weak compared to Herman Cain's 9-9-9, and what we need is strong medicine not weak medicine. Too many people are suffering, and desperate. The 9-9-9 plan will work faster than the Romney plan by about a year to 15 months. But both plans are good.


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