National Sales Tax

Ezra brings up the "FairTax" again - glutton for punishment, apparently - and includes a handy chart prepared by the Treasury Department comparing our current tax levels with what would be paid under the sales tax system.

People making under $15,000/yr would be ok, but once you start making the princely sum of $30,000/yr the tax is regressive, becoming more of a burden until - gasp! - you start making more than $200,000/yr.  As El Cid said in Ezra's comments,

I wonder how it affects centimillionaires and billionaires. Fortunately these charts always stop at like $200K because going any higher is just not that politically interesting.

It's these precious few people who control so much of this country's wealth that this tax is intended to benefit the most, since they actual spend a very small part of their personal wealth.  There are only so many huge yachts, priceless paintings and diamonds the size of goose eggs, after all.   

Americans for Fair Taxation (at the same link for the first chart) has a different take on taxation levels and therefore their own chart.

Their take on it makes the national sales tax marginally more progressive, mainly by putting certain income groups together and, for the $42,436-$75,223 range, apparently adding the 7.5% payroll tax paid by corporations onto the personal tax burden.  I suppose that they think if payroll taxes were to be eliminated, our goodhearted titans of industry would automatically give every worker affected by them an immediate 7.5% raise.

I'll wait until you stop laughing.  All better?

Notice as well that this chart stops counting at $75,223/yr.  Aren't these the same people that like to point out how many Americans make over $100,000/yr?  Are we really supposed to believe that the person making $250,000/yr is going to pay the same portion of their income on a national sales tax as one making just over $75,000?

The national sales tax - I refuse to call it a "FairTax" except in quotes because I'm tired of unironic Orwellian phrases - is just another make-the-rich-richer scheme.  Of course any benefit that accrues to the wealthy is always sold as justified because "the rich create jobs."  While it's taken me a while to get here, this is what I really want to address.

"The wealthy create jobs."  No, they don't.  They never have and they never will.  I create jobs, and most of you create jobs.  There has never been an example of a rich person swooping in to some random location to build a factory that makes things no one wants or needs just because they want to "create jobs."  Think of the richest people and biggest corporations in America.  They are big and rich because they make products and/or provide services to average people.  How many jobs does Rolls Royce provide?  How many jobs around the world are "created" by Ferrari?  Let's compare the economic benefit of having a luxury yacht manufacturer in a town compared to a JC Penney distribution center.  How many people work for a Brooks Brothers store, and how many stores are there compared to KMart and Target - even Wal-Mart, as terrible a corporation as it is, owes its success and size to middle class and lower consumers.

This is the truth that conservative economics seeks to obscure:  wealth never "trickles down."  Never.  Wealth always flows from poor to rich.  It always has, in every society for all time.  People become wealthy by responding to or even anticipating a need/desire of the masses and fulfilling it.  You say they deserve to be rewarded for their hard work, innovation and skill, and I say they are rewarded.  Jesus might say they have received their reward in full.  Look around.  People who work hard, can innovate and have high skill levels are compensated quite well for their trouble.

But that is no reason to then punish their customer base with punitive taxes.  Further, it's hardly punitive to expect those who have personally benefited the most from our highways, government technological research, government medical research, dirt-cheap rates for bandwidth leases, SBA loans, decades-long property tax abatements, regulatory environment that protects patent-holders and encourages competition, and of course rest of the countless ways in which it is the legal environment in the USA that allows so many people to act in such creative manners.

It's far past time for the millions upon millions of people who actually make things work, who actually buy the products and services upon which our economy is built to understand their true role and importance to the creation of wealth in this county.  It's far past time for us to demand that all Americans pay a real "fair" share, that those lucky enough to be born into wealth stop receiving government protection.  It's far past time to let go of those aristocratic traditions we supposedly left behind over two centuries ago, to stop according lordly status to anyone capable of making money.  We are not supposed to have Lords and Ladies in this country, and no one is supposed to have their money and/or position by divine right.  Without the lower and middle classes, the rich in this country would have nothing.  It's time to make sure that everyone understands this.

Update:  Commenting over at Matt's place, Jeffrey Davis asks, "Would the super-rich have to pay sales tax on all the politicians they buy?"  This just could be the way the national sales tax scheme manages to be revenue-neutral without the need to set it at 50% or higher.  Don't tell Huckabee.

Comments

[Sir Charles]

But that's class warfare Stephen -- and we all know that's bad. Mr. Broder tells me all the time.

[has_te]

Cognitive dissonance, actually.

This is the truth that conservative economics seeks to obscure: wealth never "trickles down." Never. Wealth always flows from poor to rich."

It's the gravity thing and down and flow.

"I've got this great illustration"..I exclaimed, about how it does trickle down
but neither very far nor ever at all very broadly. Which it does not indeed.
And, while you're absolutely correct, one is still faced in the analogy
with the difficulty in picturing how it gets up there ab initio...
to dribble as they claim it does.

[Bruce Webb]

"There are only so many huge yachts, priceless paintings and diamonds the size of goose eggs, after all."

Plus you can buy and dock that huge yacht in Bermuda, hang those priceless paintings in your villa on the Riviera, and stash those goose eggs in a safe deposit box in London. And not pay any US tax at all.

The opportunities for tax avoidance under FairTax are huge for the middle class and incalculable for the wealthy. As an example I know people who are either self-employed or are in jobs that have no dental coverage that schedule vacations in Mexico around appointments to have their teeth fixed there. On a straight out cash basis you can pay for your flight and lodgings out of the cost differential. That's today, add 23% or whatever on top of that and everyone will be buying goods and services across the border.

It takes a pretty clairvoyant custom inspector to realize that you left the US carrying nothing and returned with four suitcases full of nice belongings bought overseas. Combine a stronger dollar with a FairTax and American retailers will wonder what the hell hit them, I live an hour from Canada and nobody is going to notice that I left the US wearing ratty sneakers and a t-shirt and returned wearing $200 shoes and a $500 sport jacket. 23% or 30% builds in a whole bunch of tax avoidance, 'I can get it for you wholesale' takes on a whole new meaning.

[Sir Charles]

Bruce,

Not to mention the thriving black markets that we will create within our own borders.

[Karmakin]

Bravo.

[Ricky]

Don't forget that the 23% (which is really 30%) wasn't even considered a reasonable number the Bush Treasury Department. I believe they pegged it at 36% in order to be revenue neutral but also assumed 100% compliance (something even the IRS doesn't do for income tax estimates!) and didn't account for the fact that the government would also have to pay the sales tax on all its purchases, which would mean either reducing spending by 36% immediately, raising the rate even higher, or just borrowing another couple of billion dollars from our soon-to-be Chinese overlords. If Bush can't lie these numbers into something reasonable I can't imagine this proposal getting anywhere.

[El Cid]

Thanks for noticing the comment, but in general it is amazing how in this country the super-ultra-upper classes have such a gigantic impact on not just our policies but the entire political system, and we generally just don't discuss this empirical reality, instead we focus on whether or not the insta-mansion owners are "rich" or not -- as if the average millionaire etc. has as much impact on policy as just one billionaire.

One of our last major power structure researchers, G. William Domhoff, recently posted a speech he gave in 2006 on the whole topic.

http://sociology.ucsc.edu/whorulesamerica/theory/mills_address.html