A national sales tax would be a consumption tax, meaning that people would pay it every time they make a purchase. 4. More money coming into the budget with the potential for households to be spending less in taxes every year. Just because Income Tax is an amendment doesn't mean we are forced to use it. This move on paper looks like it … This article is from the archive of our partner . 2. It would prevent many forms of tax evasion. However, a seller is responsible to collect sales tax from consumers and pass it to the official authorities. Sales tax is only charged by the end user of goods and services because a product passes through several manufacturing stages which are operated by different entities and it will require a huge amount of documentation to prove who should be responsible for paying sales tax. H.R.25 begins with "To promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States." A national sales tax would require a new system of reporting and money collection that doesn’t exist right now. Some, particularly those in conservative circles, have advocated for a sales tax as an alternative or complement to the national income tax. From Disabled and $500k in Debt to a Pro Blogger with 5 Million Monthly Visitors, 18 Biggest Pros and Cons of a Mixed Economy, 20 Open Range Cattle Industry Statistics, Trends & Analysis, "From Disabled and $500k in Debt to a Pro Blogger with 5 Million Monthly Visitors. Phases, Advantages and Disadvantages, What is Sales Growth? Shadow Pricing: Meaning, Examples, Advantages, Uses, and Limitations, Sales Broker: Role, Advantages and Disadvantages Explained, What is Sales Compensation? Advantages of sales tax 1) Fairness Citizens of a country are taxed differently depending on their incomes. A sales tax levied on every product has to be taken care of. Sales growth Explained in Detail, Sales Canvassing: Meaning, Strategy, Tips, Advantages, & Disadvantages, Who is a Sales Consultant? I submit that a National Sales Tax like most of the states already have should totally replace the Income Tax. Sales taxes are not imposed on everyone. http://www.REIClub.com Are Tax Sales a Good Investment For Real Estate Investors? In business, entrepreneurs experience peaks and valleys but for small business owners who operate seasonal businesses those ups and downs intensify. 3. Thirty countries in Europe have VATs, but just three, Canada, Japan, and Switzerland, have rates under 10%. Required fields are marked *, Copyright © 2020 Marketing91 All Rights Reserved, What is Sales Tax? Usually, the seller adds a greater amount in the price of the product than tax and if there is more than one middle seller for a product. The Cons of a National Sales Tax. Follow. It would eliminate a lot of bureaucracy. January 12, 2010 Link Copied. For example, a citizen who earns $100,0000 annually will pay significantly high taxes than the citizen who earns $100,000 annually. Types and benefits. It would eliminate double taxation issues on certain types of business income. Therefore, it is easy for both tax collector as well as for the taxpayer. ... National Tax Lien Association. Quality and Skills of a Sales Consultant. The sales tax does not develop civic consciousness, because taxpayers are not aware of the tax they are paying as it is embedded in the price. Everyone pays their fair share based on the amount of purchasing that they do every month. Take an example of salt. 1. It penalizes low-income earners Low-income earners, well, earn much less than others. It would lower business taxes. Posted on March 27, 2017; By (0) Comment; General guidelines 1″ margins Double-spaced 12 pt. One of those options is the implementation of a national sales tax. Combined with an advertising campaign to make the plastic bag unacceptable, use has fallen between 90-94%. The sales tax would have the same percentage say 10 to 12% and everyone pays it. Several Republican presidential hopefuls have stated their support of the “Flat Tax.” Ted Cruz, Ben Carson, and Rand Paul have all expressed interest in a tax reform plan that moves our current code to a new “Flat Tax.” As a result, there is renewed interest in what a Flat Tax is, what its pros and cons are, and how it could impact different taxpayers. It may or may not replace the existing national tax system and would be in addition to any state sales taxes. Instead of having progressive taxes on the amount of money that is being earned, a national sales tax would charge the same amount nationally to everyone for the goods and services that qualify. In America, a federal VAT would be imposed on top of the retail-sales tax charged by 45 states. Personally, I would find this to be a difficult thing to accommodate in addition to the already high state sales tax in my state, and I'm sure many other Americans would agree. It would create systems of double taxation. Citizens of a country are taxed differently depending on their incomes. Just because Income Tax is an amendment doesn't mean we are forced to use it. May 2, 2019 By Hitesh Bhasin Tagged With: Sales management articles. People don’t like a flat tax because a true flat tax impacts taxpayers disproportionately even though the tax is proportionate. Retail stores, for example, might add a 30-percent charge to every purchase and then forward what they collect to the federal government. The pros and cons of VAT A last resort. To reduce the burden on the poorest consumers, sales tax laws generally exempts essential goods like food from the tax. ... Our analysis of the pros and cons of different tax designs applies almost identically to taxes on added sugar as to taxes on total sugar. Playing next. It would be similar in principle to a cigarette or alcohol tax. A VAT would also solve the problem of lost online sales taxes since the imposition of a VAT … As per the law, a seller can collect some amount of sales tax from the consumers they are selling goods and services to. Retail stores, for example, might add a 30-percent charge to every purchase and then forward what they collect to the federal government. Because more people would be affected by a national sales tax, the end result would be additional funds being raised to meet the needs of the people. This is because sales tax is collected from the end users rather than from the seller. Advantages of growth Possibly the greatest competitive advantage of business growth is the ability to capitalise on the economies of scale . National Sales Tax. A national sales tax would be a consumption tax, meaning that people would pay it every time they make a purchase. To do this, the government needs to have a team of administrative people to manage everything effectively. 5. In America, there is already sales tax, which falls into two categories: selective sales tax and general sales tax. There would be huge implementation costs. Definition and Steps, What is coaching? Within a few weeks, there was a visual improvement in the number of plastic bags littering the… - a national sales tax will not be enough money for the government - it will encourage states to get rid of their sales tax, giving them less money - states will either continue income tax or increase sales tax significantly, starving the poor - There is a very severe problem of taxing business inputs under a sales tax. Many communities have a state sales tax that approaches 10% – if it isn’t above it already. collecting sales tax is not an easy job. These taxes discourage industries because of the high cost of production and less profit. Abe has postponed the hike to 10% two times over concerns of the economic impact. T he United States should introduce a 5 percent national sales tax.. Also known as a value added tax (VAT), this sales tax would apply to goods and services at the point of purchase. Let's stay in touch :), Your email address will not be published. The principle behind the VAT tax is that a tax is imposed on the buyer all the way up the supply chain of a product from the initial purchase of raw materials through to the retail consumer of the product. Flat Tax Vs. National Sales Tax. 10 Biggest Pros and Cons of the Fair Tax Act. The economic pros and cons in the real estate world has revealed the hot new market niche of property or home tax sales that has developed into a Tax Sale usually called a lien or deed sale. In this example, it would be 30 percent (30/100). For a household earning $100,000, the effective tax rate is around 21%. The consumption tax is an idea that is slowly gaining some traction in the United States, especially since the idea has been endorsed by former Fed Chairman Alan Greenspan. Flat tax and national sales tax are important concepts in the field of taxation. In order to learn more about the pros and cons associated with a junk food tax, read on. 1. It also applies to the sale of services. Rosetta Beltran. Only five states have no general sales tax. It could replace the income tax and the 6.2% employee portion of the Social Security tax. In the early years of the United States, its citizen did not have a lot of taxes imposed by the government. Here are some pros and cons of internet sales tax: Pros of Internet Sales Tax: States and local areas would potentially be able to collect more money to fund budget items like schools and roads; Small and medium sized brick and mortar businesses won't feel like they are competing with online retailers who aren't required to charge sales tax From my understanding, the concept of a national sales tax is to get rid of federal taxes and replace them with a sales tax of 15% flat. For example, let's assume a tax rate of 10%. 1. For the past 12 years, there have been threats, attempts, etc. The sales tax would have the same percentage say 10 to 12% and everyone pays it. Economically speaking, sales tax is an excise tax. If the proposed 14.5% flat tax is approved, the wealthier households get an effective tax cut, … The national sales tax would fall between 23% and 30%. That potential provides a lot of hope for those who are struggling with their incomes right now. 1. AdvAntAges • The property tax is a more stable and reliable revenue source than any other tax. Think of it like a sales tax, but on a much larger scale. Here are some of the results. Sales tax on goods will also increase the manufacturing cost of products because manufacturing companies have to pay more to buy raw materials. The sales taxes that exist in the states may serve the purposes of the states quite well, but they are very poor models for a federal consumption tax. What is Primary sales, Secondary sales and Tertiary sales and what factors determine them? A junk food tax has been proposed and as you might have expected, it has caused quite the commotion among observers. It benefits all businesses. Report. A national sales tax that does not have some system of refunds, rebates, or subsidies would create a regressive taxation system. According to this article: Value-added tax as I understand it, there ultimately isn't that much difference from the consumer's point of view. Different government entities employ various taxes and rates on their citizens. Most of the times, poor citizens are exempted from paying any type of tax and a large part of the government’s revenue is spent on poor citizens. Heather Horn. Sales tax increases the burden on the manufacturing industries. Essay Paper > The pros and cons of a National Sales Tax. Importance, Types & Uses. Irrespective of income, this tax is imposed only on people who buy a particular product. The amount of time that this would save everyone could increase the productivity of businesses throughout the country. 3. The tax is imposed on the money as it is paid into a household. That means $100 worth of groceries would suddenly cost $140. The sales taxes that exist in the states may serve the purposes of the states quite well, but they are very poor models for a federal consumption tax. 5 years ago | 3 views. Revenue generated from sales tax is uncertain, because of the demand for products in the market. Use taxes have quite same rates as sales tax but they are difficult to enforce, hence, they are applied on a large purchase of the product. The tax-exclusive sales tax rate is the ratio of the tax to the pretax price (that is, the tax payment is excluded from the denominator). It creates a truly equal system of taxation. This tax-advantaged account is funded with post-tax dollars. 6. A VAT would eliminate (so advocates assert) the labyrinthine U.S. income tax system, since the VAT is so much more efficient and would bring in more revenue. The FairTax, if implemented would replace most U.S. taxes with a national sales tax at a 23-percent tax inclusive (equivalent to a 30-percent tax exclusive) rate. Different coaching styles, What is Corporate Training? For example, people will be taxed at a different rate, because of the variation in the amount of salary they earn. 5. Businesses would collect the tax at the point of sale and send the revenue to the federal government. Taxing Based on Sugar Content Is Feasible at the National Level 7 ... is excluded, applying the general retail sales tax to purchases. Social cost. This could be used to create more jobs, invest into research and development, or reduce the prices of goods that are on the market. The national retail sales tax proposal would repeal the personal and corporate income tax code and replace it with a tax on all final sales of goods and services to consumers. The more tax on the rich comes by what the cost is for their purchase. sales tax on these goods is kept high to reduce their consumption. Featured Story Internet Sales Tax is a "Money Grab" and a "Job Killer" By Diane Alter, Contributing Writer, Money Morning-April 25, 2013. AdvAntAges • The property tax is a more stable and reliable revenue source than any other tax. Therefore, these taxes are impartial in nature. Sales taxes are quite simple in this regard. A flat tax is not fair to low income families. Sales taxes are a good way to control harmful products like tobacco and alcohol etc. Hence, citizens are not required to maintain any detailed records. 6. Tax Policy. Families would also be issued 'prebate' cheques as to eliminate the inherent regressivity of a sales tax system. Although switching over to this system would save money potentially in the long-term, there would be huge short-term expenses that would come from the building of the new infrastructure. Times New Roman font Page header at the top of every page Title page with title, author’s name, and institution It's been a growing field of sales that has not been exploited for the taxes these sales could generate. This means that annual filing of income tax forms through the IRS would also be … 6. ", 8 Eye Opening Employee Appreciation Stats, Spotify SWOT Analysis for 2021: 26 Strengths and Weaknesses, Uber SWOT Analysis for 2021: 23 Major Strengths and Weaknesses, Netflix SWOT Analysis (2021): 23 Biggest Strengths and Weaknesses, Tesla SWOT Analysis (2021): 33 Biggest Strengths and Weaknesses, 14 Core Values of Amazon: Its Mission and Vision Statement, Is AliExpress Legit and Safe: 15 Tips for Buyers, How Does Zoom Make Money: Business Model Explained, A Look at Southwest Airlines Mission Statement: 10 Key Takeaways, Apple’s Mission Statement and Vision Statement Explained, How Does WhatsApp Make Money: Business Model & Revenue Explained. The national sales tax would fall between 23% and 30%. How do people pay their fair share? The pros and cons of a National Sales Tax. Therefore, poor citizens do their bit to contribute to the nation’s income. For example, a citizen who earns $100,0000 annually will pay significantly high taxes than the citizen who earns $100,000 annually. You must have come across people who hide their income to save income tax, but sales tax can’t be evaded because it is included in the price of the goods and services. A national sales tax would eliminate all of the advantages that come with home ownership under the current system. Pros and cons of a national sales tax. Just as it would with a traditional 10% sales tax, the government receives 10¢ on a $1 sale. The progressive system of taxation in place puts a greater burden on those who earn more money. The ultimate cold calling guide - Use cold calls to your advantage. So a change to a national sales tax plan reduces the disincentives to work, and workers as a whole would likely end up working and earning more. 4. So the effect on income suggests that the FairTax plan could cause consumption to increase. In theory, businesses would have more money to spend because their tax rates would be lower with a national sales tax in place. Sales tax removes this type of unfairness and a citizen would have to pay tax according to the number of goods or services they consume. The sales tax is automatically collected when goods and services are sold. The yarn maker should get a resale certificate from the government that proves that he is not the end user to avoid sales tax and the yarn is further sold to a garment maker who should also get a resale certificate from the government. Hence, the cost of manufacturing products will increase and consequently, the price of the final product will increase which will become a burden on the pocket of the final consumer. The end result could be an economic benefit that has rarely been seen in the US or anywhere else in the world. This would mean that equality would hit the system of taxation so that no matter what someone’s socioeconomic status happens to be, they are all putting equal skin into the game. Without subsidies or refunds in place, it would become a regressive tax structure. People could control how much taxation affects them. That’s ultimately the question that must be answered. Unlike other types of taxes, the collection of sales taxes embedded in the price of the goods and services. Instead, the government would generate tax revenue by instituting a national sales tax on most purchased items. Tax policy pros also warn a national sales … Those one-time charges would be it because they could then eat the food grown without being taxed for it. Flat Tax Vs. National Sales Tax. I love writing about the latest in marketing & advertising. Many economists argue that when workers earn more, they'll also spend more. Tax policy pros also warn a national sales tax … Everyone has to pay the same price to buy a product. This was raised to 5% in 1997 and to 8% in 2014. The sales tax causes an increase in the price of a product. A sales tax is a certain percentage of tax imposed by the government on the sales of goods and services. Under the fair tax structure, business income would get rid of all payroll taxes. Potential Pros for a National Sales Tax include: The elimination of all income taxes. It could replace the income tax and the 6.2% employee portion of the Social Security tax. Why sales incentives should be used to motivate your sales staff? The national sales tax pros and cons show that there is some potential for this idea, but there are some problems that need to get worked out as well. A National Sales Tax would require them to pay more out of pocket towards food or services, reducing their monthly income. This would eliminate the need for tax withholdings from employee paychecks, remove many of the functions of the IRS, and simplify the overall tax structure since everything would be controlled at the point of sale. This means there are future opportunities to avoid taxation because there is no need to file an annual tax form. You should carefully consider the pros and cons of expansion before pursuing business growth. prevent many Americans from paying anything for federal taxes). If the proposed 14.5% flat tax is approved, the wealthier households get an effective tax cut, … Since it is simple, it would reduce the headache of annual tax preparation, but it would raise the tax burden for 90% of taxpayers. Elements, Importance and Advantages, What is Sales Channel Development? Now add in the expected 30% that would be required for a national sales tax and every product has a 40% tax upcharge. A similar study by the National Bureau of Economic Research in 1999 concluded that applying existing sales taxes to the Internet would slash the number of online buyers by 25 percent and reduce online purchases by 30 percent or more, thereby damaging one of the leading sectors of … The Pros & Cons of Regressive Taxation By Chris Joseph A woman pulls out cash from her wallet to pay for her goods and the sales tax. Strict and efficient taxation policies are a must for developing as well as developed countries in the world. Most low-income households that earn $40,000 or less in the U.S. have an effective tax rate around 13%. Which confuses end payers and they have to maintain detailed records to avoid legal issues. For example, a sheep farmer sells wool obtained from sheep to a company which fabricates yarn. Thirty countries in Europe have VATs, but just three, Canada, Japan, and Switzerland, have rates under 10%. The national retail sales tax proposal would repeal the personal and corporate income tax code and replace it with a tax on all final sales of goods and services to consumers. However, the National Sales Tax could reverse this problem by enticing individuals and families to consume less This will allow them to not only build savings but also lower the cost of goods and services because there will be less of a demand for them. What is Benefits Administration? Claimed advantages for the VAT are that it would: Be based on consumption, and thus provide a stable revenue base; Be “neutral,” since it would be imposed on all types of businesses; Provide stronger incentives for businesses to control costs; Encourage, or at least not discourage, savings; Upon retirement, when distributions are taken from the fund and used to purchase items, that post-tax money would then be fully taxed a second time with the presence of a national sales tax. It could create more money even though people are spending less in taxes. You can follow me on Facebook. A small amount of tax on each item does not feel too high to the taxpayer, but these collected small amounts will generate a large amount of revenue for the government which can be used for the well-being of the nation or for the well-being of the nation’s citizens. What is a Sales Contract? List of Cons of Flat Tax. internet sales tax pros and cons. 1. Sales tax is incurred on each item whether it is bought to use as a day-to-day necessity or for luxury. Trade Discount - Difference Between Trade Discount and Cash Discount? In effect, this would create a secondary “tax” on household incomes because one either pays more for used goods without taxes or pays more for new goods because of the taxes. I am a serial entrepreneur & I created Marketing91 because i wanted my readers to stay ahead in this hectic business world. Knowing the advantages of the sales tax has benefits for those on any side of the issue. Sales tax imposed on goods increase the prices of the goods, which results in a decrease in the demand for the product. The price of the product increases unduly under the name of sales tax. List of Pros of Junk Food Tax. The progressive system of taxation in place puts a greater burden on those who earn more money. sales taxes can be used politically to destroy an industry or a company. There is the added benefit that no one would be required to file a national-level tax return with this system too, which simplifies the taxation process. The argument is that a fat tax would encourage healthier eating and raise revenue to be spent on public health care. The revenue will then be sent to the federal government. Tax Lien Investing Pros And Cons. It would increase the price of goods and services. The fact that they have to spend on the same necessities are more well-placed folk is also an issue as when necessities expense is taken out of the picture, low … This would create scarcity in the used market, raising the prices for everything used because there is more demand for it. Here are some of the pros and cons to consider for this idea. Sale tax has quite a lot of similarities with the use of taxes, which is applicable to the purchaser when he buys a product outside his jurisdiction. Let’s use the Roth IRA as an example. That would reduce the value of all retirement accounts and potentially encourage households to look at other options. Tax Sales and Tax Liens - Pros and Cons of Investing in a Tax Sale/Lien. Whether someone is in the country illegally or they are purchasing items to turn into black market products, the point of sale is still going to happen in some way, shape, or form. Only the top 10% of incomes would see a tax cut. However, tens of millions of the working poor currently pay zero income tax (Remember that the standard deduction, personal exemptions, tax credits, etc. Home » Pros and Cons » 12 National Sales Tax Pros and Cons. A taxpayer can’t elude this tax if he wants to use a particular good or service. The comparison of flat tax vs. national sales tax given below will help you know things better. When a regressive tax is based on consumption such as a sales tax, it can introduce an element of freedom of choice. Sales taxes including many other taxes is a great way to make even poor citizens of a country contribute to the nation’s pay. For example: if a household wanted to grow their own foods, they could purchase seeds and equipment and be charged the national sales tax. Tax Policy. At the end of the process, the garment maker will sell garments to a retailer who will charge the sales tax on the garments sold along with the price of the garment. The chances of survival of those companies will reduce. With national debt issues looming in the background, social programs that are chronically underfunded, and a progressive tax structure that has thousands of pages of complication, many Americans are looking for an alternative taxation solution. Different government entities employ various taxes and rates on their citizens. A White House proposal to tax big banks draws heavy fire. Pros and Cons of a New Tax on Banks. The initial state levels of sales tax started small and have been building upward ever since. Consumers pay the tax, which is a tax on consumption. The more tax on the rich comes by what the cost is for their purchase.
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