25% national sales tax would pay for universal health care, balance the budget and exempt most Americans from the income tax

[ready4ONE 5,400]

Someone else may or may not have pointed this out, this type of tax falls heaviest on the lowest income earners, as more of their purchases suddenly jump 25% in price. The rich don't need more bread or cereal than the poor, but could more easily afford the price jump.

Housing prices, still more often than not remain unrealistically high, would also instantly go up by 25% which likely does not help an already slow and in crisis housing market...

What happens in states that already tax the bejesus out of sales of goods? Here in Washington State we would be paying roughly a third more for everything, and an even greater amount in gas taxes as a percentage to get products. Ridiculous!

[w¡n9Nµ7 §£@¥€r 123]

Housing prices, still more often than not remain unrealistically high...

Are you kidding me? The Housing Affordability Index disagrees.

Housing Affordability Index

To interpret the indices, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment. For example, a composite HAI of 120.0 means a family earning the median family income has 120% of the income necessary to qualify for a conventional loan covering 80 percent of a median-priced existing single-family home. An increase in the HAI, then, shows that this family is more able to afford the median priced home.

So what are HAI values today?

The national HAI is near 167 right now! It lowest in the West and Northeast at 116 and 136, which are both still well over 100.

Edited May 28, 2009 by Randomizer

[ready4ONE 5,400]

The fact remains, at least in our area, the average two income family earns an average of $50,000. The average hovel here sells for $250,000, or 5 times that amount. Solid home loans are typically based on the purchaser buying a home worth twice the annual earned income. THUS homes are not 'affordable' per my original statement.

Add 25% to the $250k home price, and affordability drops even lower...

[w¡n9Nµ7 §£@¥€r 123]

The fact remains, at least in our area, the average two income family earns an average of $50,000. The average hovel here sells for $250,000, or 5 times that amount. Solid home loans are typically based on the purchaser buying a home worth twice the annual earned income. THUS homes are not 'affordable' per my original statement.

Add 25% to the $250k home price, and affordability drops even lower...

Here's where you're going wrong. Who care what the average family makes? What matters is what the average family that can afford the downpayment and has good enough credit makes. Many families will never own a home. They are simply not eligible. Including them in the statistical pool just muddies the data.

[mawilson 2,133]

In Germany there's a 19% sales tax, and 7% on food. And guess what? Health care is still extra and costs 15.5% of your gross income.

Exactly. And they keep raising everything. That is the reality of the beast, so I am strongly opposed to this. People buy way less than here, with a tendency to consume less and less... When I was working in Germany, I couldn't afford a lot, cause I was single, no dependents and paid about 55% of my income for social security, health insurance (which is not as glorious as people might think - Kaiser PErmanente rendered better services) and income tax. No room for fancy food, going out much etc. I have WAY more spendable money here in the US.

If someone wants this, please move to Europe, Austria has an even higher VAT than Germany (over 20%!).

Thank you. That's what I've been saying for years and still no-one believes me.

[Peikko 1,575]

It's just when I compare the bottom line, I don't see these huge benefits you seem to be seeing, and I have less access to health care $ for $.

Can someone explain to me US sales tax by the way, in what way is it different from VAT aside from the fact that you have to calculate it from the price on the shelves whereas in Europe it is integrated into the price?

It is quite possible to equally calculate how much one is paying in tax with VAT, so long as you know what rate to apply.

Edited May 28, 2009 by Madame Cleo

[mawilson 2,133]

Someone else may or may not have pointed this out, this type of tax falls heaviest on the lowest income earners, as more of their purchases suddenly jump 25% in price. The rich don't need more bread or cereal than the poor, but could more easily afford the price jump.

Our taxes are being raised to pay for all those entitlements that the poor want

(e.g. socialized healthcare.)

It stands to reason that the poor should make some sacrifices too - the top 5% simply don't have enough money to pay for it.

[rebeccajo 14]

In most countries that implement VAT, food is 0 rated not exempt. Effectively for the consumer that means no sales tax on food. Of course, there is a question of what is and isn't food. Clearly, milk is but the potatoe chip isn't . Why would the US want to put VAT on food? States do not.

Many states do. We pay sales tax on food in West Virginia.

[w¡n9Nµ7 §£@¥€r 123]

No sales tax on food and clothes in the dirty jerz.

But they get theirs elsewhere

[Peikko 1,575]

I have to say, paying sales tax on food does seem to be nonsensical. I guess I don't understand your tax system at all. It seems reasonable to me to zero rate food. I can understand taxing eating in a restaurant of course. In the UK children's clothing and shoes are also zero rated.

[w¡n9Nµ7 §£@¥€r 123]

Euro VAT for America?

A European-style value-added tax (VAT) ... would have a similar effect as a national sales tax, and be a large new burden on American families.

A VAT would raise hundreds of billions of dollars a year for the government, even at a 10-percent rate. The math is simple: total U.S. consumption in 2008 was $10 trillion. VATs usually tax about half of a nation’s consumption or less, say $5 trillion. That means that a 10% VAT would raise about $500 billion a year in the United States, or about $4,300 from every household.

...

Some fiscal experts think that a VAT would solve the government’s budget problems and reduce the deficit, as the Washington Post noted yesterday. That certainly has not happened in Europe where the average VAT rate is a huge 20 percent, and most nations face large budget deficits just as we do.

...

A VAT would not solve our deficit problems because Congress would simply boost its spending even higher, as happened in Europe as VAT rates increased over time.

[mawilson 2,133]

I have to say, paying sales tax on food does seem to be nonsensical. I guess I don't understand your tax system at all. It seems reasonable to me to zero rate food. I can understand taxing eating in a restaurant of course. In the UK children's clothing and shoes are also zero rated.

Why? What's so special about food?

[Peikko 1,575]

It's quite possible that congress would not use the income to solve the deficit problems. I am not sure the American public would want to have their tax burden increased and have nothing to show for it.

[Peikko 1,575]

I have to say, paying sales tax on food does seem to be nonsensical. I guess I don't understand your tax system at all. It seems reasonable to me to zero rate food. I can understand taxing eating in a restaurant of course. In the UK children's clothing and shoes are also zero rated.

Why? What's so special about food?

It depends how one views things, of course. Personally, I do think that taxes should have at least some proportionality to one's income. Food is an essential item, one can't live without it. Taxing food therefore means that those on a lower income are necessarily paying a greater % of their income out again in taxes. That does not seem reasonable to me.

[w¡n9Nµ7 §£@¥€r 123]

I do think that taxes should have at least some proportionality to one's income.

I think taxes should be proportional to the value you add to society. Those who add more value should pay less. You can contribute to society in one of two ways, by adding value through work and enterprise, or by paying taxes. It can be either/or or a combination.