A better alternative to income tax?

This topic contains 5 replies, has 3 voices, and was last updated by xdunlapx 8 years, 2 months ago.

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  • #8403

    Martin Reed
    ★ Admin

    Seeing as it's pretty much tax season here in the States and I just got done with my filing and scrambling the money together to pay a huge tax bill, I got thinking…

    Wouldn't scrapping income tax altogether and instead taxing consumption more (ie a higher sales tax) be a better alternative? That way, we are taxing the people that consume the most, who would typically be the people that can afford to pay higher taxes. Wouldn't this be a fairer (and far simpler) system?

    #12307

    xdunlapx
    ✘ Not a client

    I'm not sure a higher sales tax would work for those who are in poverty or near poverty status. I know I've been there and always had to count pennies for the excess charge that sales tax created. I wouldn't recommend higher sales tax. I think taxing the wealthiest people would be an appropriate step in the right direction. But even then that can be harmful to them, so I think setting up a fund for people to donate to that only goes toward supplementing the government's defecit would be better if you are worried about our national debt.

    Income tax, if set up right on your W-2 (or other form) shouldn't be too much of a bother if you file your taxes right the following year. For me, I'd select 1 deduction and file for 1 deduction. That way you dont owe taxes and may get some back. I always got back $ when I was working and filed 1 deduction. It may not have been much but at least I didn't have to pay.

    I did file 3 one year thinking that I was allowed to due to my status as head of household (one person, me in the household), and 2 others that fit me. Well I owed taxes that following year so I learned my lesson to only file 1.

    #12308

    Martin Reed
    ★ Admin

    It works differently when self employed as taxes aren't automatically witheld from your earnings. You also have to pay estimated tax based on what you think you'll earn the following year.

    Aren't those in poverty already suffering with paying income tax – or are you talking about people with earnings so low they are exempt? If items other than basic foods etc were taxed, then surely only those with higher incomes would pay the most tax? Currently, as a proportion of income, I believe it works out that the richest people actually pay the least tax.

    I think it's an interesting concept, but of course it has flaws, as you rightly pointed out.

    #12309

    MarinaFournier
    ✘ Not a client
    'xdunlapx' wrote on '30:

    Income tax, if set up right on your W-2 (or other form) shouldn't be too much of a bother if you file your taxes right the following year. For me, I'd select 1 deduction and file for 1 deduction. That way you dont owe taxes and may get some back. I always got back $ when I was working and filed 1 deduction. It may not have been much but at least I didn't have to pay.

    We do something similar. We have a huge mortgage payment, and no real room for household repairs etc unless we “overdeduct” by specifying additional dollar amounts to be taken out. We get back a fair amount each year, that we use for big project repairs etc.

    #12310

    MarinaFournier
    ✘ Not a client
    'Martin' wrote on '30:

    It works differently when self employed as taxes aren't automatically witheld from your earnings. You also have to pay estimated tax based on what you think you'll earn the following year.

    That is always such fun when you haven't a clue about future earnings, per quarter or per year. Usually it's per quarter.

    Quote:
    Aren't those in poverty already suffering with paying income tax – or are you talking about people with earnings so low they are exempt? If items other than basic foods etc were taxed, then surely only those with higher incomes would pay the most tax? Currently, as a proportion of income, I believe it works out that the richest people actually pay the least tax.

    The Flat Tax gets debated in Congress every few years, but never passes. What you're describing sounds a lot like VAT. Are poll taxes in the UK like our income tax?

    Right now, more and more people are getting stuck paying the Alternative Minimum Tax, which was intended for the very wealthy, and has not been adjusted for inflation. It treats many deductions, allowable in lower AND upper tax brackets, as an attempt to escape proper taxation. Congress doesn't seem inclined to fix this, either. Grrr. We're caught between, as we (my family) is also caught between generations that need our care, sometimes expensively.

    I hope mortgage interest is never removed as a deduction, or our family (and many others) will be well and truly sunk.

    #12311

    xdunlapx
    ✘ Not a client
    'Martin' wrote on '30:

    It works differently when self employed as taxes aren't automatically witheld from your earnings. You also have to pay estimated tax based on what you think you'll earn the following year.

    Aren't those in poverty already suffering with paying income tax – or are you talking about people with earnings so low they are exempt? If items other than basic foods etc were taxed, then surely only those with higher incomes would pay the most tax? Currently, as a proportion of income, I believe it works out that the richest people actually pay the least tax.

    I think it's an interesting concept, but of course it has flaws, as you rightly pointed out.

    OH self-employed. Ok. I really don't know much about the subject other than from the mistakes I've made. My dad would know much more about it than me. He's lived longer. 😉 I'm only a month away from being 27. So I haven't learned much yet.

    I meant the people whose income was too high to be exempt and too low to be helped financially from any organization or from the gov't. When I was working I made too little to be helped but too much to be exempt. It's a crappy hole that is. But I don't work anymore due to mental and physical issues. Luckily I have very loving caring parents who I live with. I'm trying to get SSDI but they keep denying me. GRR

    I don't know if I would have to file taxes if I got SSDI. That I will have to ask my attorney.

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