General Question

UScitizen's avatar

Did the United States Congress recently pass the first Federal sales tax in history?

Asked by UScitizen (4273points) July 8th, 2010

I just had a real estate agent tell me that beginning in 2014 there will be a 3.8% Federal tax on home sales. Is this true?

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33 Answers

dpworkin's avatar

Nonsense. The last thing they want to do is put the brakes on the housing market.

tedd's avatar

That would be plastered all over the news if true.

Fun side note, a 1 cent sales tax on all purchases of a dollar or more would pay for healthcare in it’s entirety (and I’m talking public option healthcare).

5 cents would probably see us eliminate our deficit…. completely.

dpworkin's avatar

VAT is regressive.

missingbite's avatar

@tedd If true, why hasn’t it worked yet? What are your sources?

MrItty's avatar

@missingbite Uh. How can it work before it’s implemented?

missingbite's avatar

@MrItty There are VAT’s all over the world. Greece has one. They are bankrupt and rioting in the streets. I haven’t seen a VAT work yet. Maybe @tedd has an example. Best I can tell, it’s a loser.

MrItty's avatar

@missingbite I presume @tedd was stating that such a sales tax would pay for Healthcare in America and eliminate deficit in America. Then you asked why it hasn’t worked “yet”. The answer is because it there is no such sales tax in America, and it therefore can’t work.

I have no idea if @tedd‘s figures are accurate or what his sources are.

missingbite's avatar

@MrItty I see where my question was worded wrong. I should have said where has a VAT worked and what makes anyone think it would work here. I find it hard to believe that a 5% tax would wipe out 13 trillion dollars. I could be wrong. That is why I am asking for a source.

MrItty's avatar

@missingbite I agree. And fwiw, @tedd didn’t even suggest a 5% tax. He suggested a “5¢ tax on all purchases greater than a dollar.” That’s significantly less than 5%.

tedd's avatar

I did mean 5% sales tax to clarify, I typed too quickly before.

And it wouldn’t eliminate the 13 trillion dollar debt instantly, but it would pretty much eliminate the deficit, which would make us profit and then shave down the debt. Though to be fair, the country is MEANT to operate with a deficit (the founding fathers themselves started it and planned for it). Since the people of the US own most of our debt, they profit on the interest and it helps the economy. We just need to get back down to about a 75% of GDP debt, rather than a 1 trillion shy of 100% debt.

And you seem to be mistaken over what a VAT is and what I’m talking about. VAT is a value added tax, where when one thing of goods is upgraded to another thing of goods, you tax THAT step. For example, if I take the raw material of steal and turn it into a car frame. That is NOT a sales tax.

And I don’t really need a source to explain that a 5% sales tax would take down the debt and deficit. Our GDP is 14 trillion dollars. 5% of that is 700 billion dollars. Since the deficit is not a running total, but calculated new every year, almost every year that would lead to us having surplus funds. If Bush had the 5% sales tax on all purchases, all but 1 year of his presidency would’ve seen surplus money in the budget, rather than pretty incredible deficits.

MrItty's avatar

@tedd Actually, you really do need a source. Because you seem to be operating on the assumption that if we instituted a 5% sales tax, that nothing at all would change except that we would be giving 5% more to the government. You are 100% neglecting any and all side effects that tax would have. Would sellers charge more? Would buyers buy less? How would sales at different businesses be affected? You need a source to back up your assumption that nothing else would be affected, because I for one don’t agree with your assumption.

missingbite's avatar

@MrItty Agreed. I was giving the benefit by saying 5%. He stated 5 Cents on a dollar or more. I used the highest which is 5% and still failed to see how it would work.

@tedd We are all well aware that some debt is good. Your math is simply, well, too simple. I also would like to see a source. If what you calculate is correct, why is out President rolling back the Bush taxes on only the “rich” at a much higher rate than 5%? I would guess politics would be the answer. Either way, I am not getting it.

tedd's avatar

The math I’ve given is obviously simple, there would be lots to consider. But the clear point is that a sales tax could do great things as far as our budget.

And he’s not rolling back anything. When they were implemented they were given an ending date of 2010 (Obama had nothing to do with that, in fact I don’t think he was a senator yet even). And its only on the rich because that’s the only people the Bush tax cuts helped.

I would assume he’s letting them expire because they’re a huge impact on our budget. Those extra large checks from the IRS might as well have been in Chinese currency, because thats who paid for them. The ENTIRETY of the Bush tax cuts (around 1.5 trillion dollars) was put on the deficit.

And lastly, its not a sales tax, its an income tax. There has never been a federal sales tax.

MrItty's avatar

@tedd No, that’s not a “clear point” at all. Again, it’s your assumption. Again I ask you for a source to back it up.

tedd's avatar

My source is common sense. Ohio has a 6% and some change sales tax, it hasn’t stopped people from spending.

I’m not even proposing that a 5% for sure gets set. My point is there is some serious revenue to be made there that could help the government. Do you really think people would stop buying things if for instance, a 1% sales tax was implemented?

dpworkin's avatar

And a sales tax is every bit as regressive as a VAT. How do you defend that?

missingbite's avatar

@tedd Yes, some people would spend less because of 1%. Especially the poor who live paycheck to paycheck some of which is already government subsidized.

tedd's avatar

You all seem to think taxes are the mortal enemy of a functioning economy. They’re not. If you want a functional government you need taxes, and we’re taxed less now than we have been at anytime in the last century.

In the 50’s under Truman and Eisenhower our nation saw its biggest economic boom EVER (by percentage). And thats not just post WW2 chance by being one of the few nations with an infrastructure, thats 15 years later and we’re still rocking it out.

The highest tax rate during the 50’s was right around NINETY, as in 9 – 0, 90%
Yet the economy grew just fine, and we still had eccentric rich people like Howard Hughes, who had so much money burning a hole in his pocket that he designed and built a crane/boat out of his own funds to lift a downed submarine from the oceans floor…. strange.

MrItty's avatar

@tedd the reason it’s called “common” sense is because everyone can think that far. It’s thinking further than that which is required. It’s figuring out what the ramifications and effects of that policy will be, that’s important. You haven’t done that, as I’ve already illustrated.

tedd's avatar

@missingbite I live paycheck to paycheck and I would pay an extra 1% if I knew it would help my country to a massive degree. I’d rather give that extra penny to them than some loan company who is just ripping me off for tons and tons of money. America… the land of the free, home of the slaves.

tedd's avatar

@dpworkin They’re regressive when you implement excessive taxes, which is the case for any and all taxes, not just sales and VAT. REASONABLE taxes are not bad at all.

MrItty's avatar

@tedd no, I don’t think that at all. What I think is that you are trying to simplify an incredibly complex issue into a short one statement phrase, and then asserting the obvious truth of that statement. That is simply not possible.

dpworkin's avatar

@tedd Explain to me how reason progressivises a flat tax.

tedd's avatar

Yes I’m simplifying it, but the principle stands the same. Obviously if you make too high of a sales tax it would somewhat impact sales… But there is a point where a sales tax would not impact sales that much, and yet would still be extremely beneficial for the government and hence the people.

Reason it like this dp….. If i’m buying a loaf of bread for a dollar and i pay 1 cent tax on that, why should that not be the same for anyone? Now lets say I go out and buy a 200,000 dollar sports car, the same 1 percent tax would apply. Now you might say, but thats not fair to the poor, they can’t pay that tax on the car….. Yah but they can’t afford the car either….......... Sales tax is very different from income tax, and a flat rate is not a bad idea there.

And look i’m not even saying a sales tax SHOULD be implemented. I’m saying its not as bad an idea as you all seem to think it is, and it should be CONSIDERED.

dpworkin's avatar

@tedd In real life, sales tax falls disproportionally on the less wealthy unless there are exceptions made for necessities. I would prefer to see sumptuary taxes.

ragingloli's avatar

Establish tax brackets based on the type of goods.
Basic and essential products, like food, water, electricity, petrol, non-alcoholic drinks: a lower tax rate.
Normal and non-essential products, like normal clothes, alcoholic drinks, tobacco and other drugs, basic electronics, etc: a higher tax rate
Luxury products, like cars, expensive plasma television sets, Yachts, private planes, jewellery, perfume, etc: high tax rate.
And voilá, a progressive VAT system.

tedd's avatar

@ragingloli I like, except VAT is not sales tax (it was discussed earlier).

MrItty's avatar

@tedd please stop putting words in my mouth. I never once said it’s a bad idea. I asked you for a source to back up your assertion that it’s not a bad idea. In fact, you’ve been asked for a source many many times now, and haven’t produced one. I therefore must conclude you don’t have one, and are only speaking from your own limited perception of the situation. Which, as I stated earlier, is not valid if it doesn’t consider every possibility. I am not an economist, I cannot even see every possibility, let alone determine how this idea would impact each one. I’m guessing you’re not either.

UScitizen's avatar

I’m surprised no one has actually answered the question. I just found the answer, finally. It was somewhat difficult to find the actual (truthful) answer. It appears that the tax is one of many new taxes implemented by the recent health care legislation (aka Obamacare). The tax is real, but it only kicks in above the exclusion for capital gains. In other words, most of we average people will never pay it. Thanks for the entertaining discourse.
http://www.factcheck.org/2010/04/a-38-percent-sales-tax-on-your-home/

dpworkin's avatar

Oh, my God! The fuckers are making rich people pay a little more for something so we can have health care! Someone get me my assault rifle.

perspicacious's avatar

Yes, it’s true. I didn’t realize it would not kick in until 2014. @UScitizen Thanks for the link.

MrItty's avatar

Good link, @UScitizen But it’s hard to see how this can be called either a “sales tax”, or “new”. From the article cited:

=============
But the bill also says the tax falls only on that portion of any gain that is “taken into account in computing taxable income” under the existing tax code. And the fact is, the first $250,000 in profit on the sale of a primary residence (or $500,000 in the case of a married couple) is excluded from taxable income already.
=============

That is, it’s not a sales tax in the traditional sense of “anything sold is taxed”. It’s a tax on a small percentage of the profits from the sale of real estate property. And it’s not so much a new tax, since the percentage of the profits of these sales is already taxed, in that it’s considered taxable income.

Fenris's avatar

Not to twist the subject back around, but from experience, in Tampa, FL, the 7% VAT works pretty decently. It’s a little high considering the pay rate in that town, but things get done.

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