Sales tax

[Jonathan Buhacoff]

Proposal:

Levy a sales tax on all products and services, with the tax rate varying by category and class and price tier of products and services such that the most essential products and services on which people rely on are taxed the least, and comfort items taxed more, and luxury items taxed the most.

When enacted, a sales tax shall briefly describe the category and class of products and services to which it applies. A sales tax shall not be made so specific that it applies to a single company or product to the exclusion of other similar companies or products. Prices or price tiers shall not be used to define a class of product.

The executive branch of government may publish a set of reference tables to provide guidance to companies as to how much sales tax to charge, and may update these reference tables as often as is needed. The executive branch shall respond to inquiries from companies who are unclear about the applicable sales tax rate for their products and services. If a company contests any such guidance it receives in court and is successful, the company’s only remedy shall be revised guidance.

Intent:

The sales tax should be able to adapt to a changing market and not require government to update it frequently. For that reason, it should describe the category and class such that a company can recognize its product or service in the reference tables and immediately know the sales tax to collect.

A category such as groceries, utilities, software, manufacturing equipment, games, etc. can be described even more specifically such as fruits, vegetables, seeds, or meats, and even more specifically as coming from trees or vines, or coming from hooved animals or birds or fish, or even as specific as apples, bananas, beef, or chicken.

A class within a category can be defined self-service vs concierge, essential vs advanced, basic vs premium, matte vs glossy, organic vs non-organic, domestic or imported, cost-sensitive vs luxury, safety vs adventure, etc. A category should have two or more classes for contrast. However, the government may also define a single class in a category and name it “all” if that category is not further sub-divided into classes. The government should define broad classes that can be used in multiple categories, however some categories will require narrower classes to differentiate products within them and the government should do that when needed, taking care to ensure that the classes are not so narrow as to single out a company or product. There must be substantial qualitative difference between one class and the next to avoid a charge of discriminating against a specific company or product or service.

The government must not use price tiers to describe a class of product because prices can change every year, and because few if any companies have perfect knowledge of the market to determine if their prices are in the top 5% or top 25% etc. and because this can change at any moment based not only on their own actions but on the actions of other companies in the market.

The government may not single out a producer of an item. So if the combination of category, class, and price tier is too specific and only a single product matches, a judge would need to consider if the government used similar class description in other categories or not. If a similar class is used for other categories, and by coincidence there is only a single company selling a matching product, then it is not considered to have been made too specific in that category.

The government shall not become liable to companies for any mistakes in guidance because it’s already paying for those mistakes in the form of operating the court, because those sales taxes are passed to customers, so the damage to the company is limited to whatever consumers compared the total price with sales tax included to competitors instead of the base price.

Discussion:

The wealthiest 1% of Americans earn $500K+ in personal income. The wealthiest 0.1% earn $2.4 million annually. The wealthiest 0.01% earn at least $63 million annually. This excludes the ultra-wealthy who take hardly any paycheck at all but have the immense wealth of their companies available to them. https://www.inquirer.com/business/america-rich-top-one-percent-income-wealth-inequality-20191017.html

It’s unfair that the complicated and loophole-ridden tax code enables people with more money, as a group, to actually pay less taxes than people with less money. The way to fix it is by doing two things: First, eliminate the personal income tax for individuals. Second, set sales taxes on goods in a way that allows poor people to pay less or even no tax for the essentials such as food and water, and wealthy people to pay more taxes on luxury items like large houses and boats.

A sales tax means wealthy people don’t need to hunt for loopholes in the tax code, it doesn’t matter if they “earn” their money or if they merely “control” some asset, the tricks with taking loans won’t matter, because regardless of how they get the money or who is paying for it, the tax is paid for the item purchased. Wealthy people buy more things, they buy more nice to have and luxury items, so they’ll naturally be paying more in sales taxes.

If a wealthy person decided to live like a poor person and buy all the essentials, then they wouldn’t be paying so much taxes. They could invest or donate that money instead.

Related topics

Taxes
No personal income tax
Corporate income tax

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