Can I also google the first sentence in your post?
Not why the what without the who now?
Seriously, you're not making much sense, I fear your prolonged exposure to Mike D'Antoni had rotten your mind.
Sorry, mobile again. What I was just trying to say was that taxes change the price the consumer pays and the quantities sold in a market and also creates dead weight loss.
compliance costs are what drives the costs up of income and corporate taxes versus sales taxes. In addition, income taxes penalizes savings. not that we need savings right now, but a larger savings investment 10 years ago could have helped our current situation.
That doesn't make sales taxes better but that is what they have going for them. There's less waste in the system since they're easier to enforce and collect as well as probably less dead weight loss (most items are pretty inelastic that get taxed) at the low tax rates and promote savings. There are numerous tax systems (didn't even get to pigouvian) and most of pros and cons.
Just curious, so would you be in favor of something like the X tax?
Possibly. I'm not much a fan of payroll taxes as the workers tend to bear all of that. It also depends on how much of a VAT we're talking about which as I've seen at 35%. Truth is, no economist knows what happens with sales taxes that high and all the models trying to account for that are basically making poor guesses (human psychology is unknown). This is why a national sales tax to replace all taxes (or VAT form) is dangerous. I'd also not like the lack of an investment income tax; I don't care much for the argument that it's paid for via spending. That's horseshit as the worker is taxed both at the wage and spending levels and the investor is not. It also has no deductions in it which while I'm not a fan of deductions in general, I do think there need to be exceptions for children, medical, and student loans.
If you tax investment the same, you could lower the other taxes.
That said, if I were to design a tax system, I'd start by taxing
economic rents before anything else. But that's way too radical for the United States even if Adam Smith recognized this before anyone else. After that we could do a combo of a national VAT and highly progressive income or wages/investment income tax.
One thing that I realized in thinking about Jindal's proposal to replace our corporate taxes with a sales tax is that a sales tax would essentially become a tax on a business' expenses, as opposed to a tax on a business' profits like a corporate tax.
This means it heavily effects all businesses regardless of whether they're in the red or black, and it hurts businesses with low or negative profit margins FAR MORE than businesses with high profit margins.
The other day I mentioned how my boss is now selling bottles of whiskey that are no longer being produced for $500 a bottle, when he bought them for probably $30 a piece. His already high profit margins are only getting higher, and all that profit will go untaxed. Meanwhile, a business struggling to survive that has a high level of expenses would have to pay significantly more for any products they buy, and that could be a death knell for such a company.
Though I'm not sure how much sales tax a business can deduct at the federal level. That could marginalize this problem considerably.
Yes, a company at the margins will get hurt by the sales tax unless they are selling a highly inelastic good (milk, gasoline).
People often claim businesses just pass on taxes to the consumers but this is simply not true. That said, as someone who has experience with this, if you're a mom & pop shop, you don't always collect taxes.
Which does bring us to another issue of sales taxes, compliance at high tax levels. Sure, at 6% sales tax a mom & pop doesn't skirt much, but put it at 40% and who the fuck knows what happens.