Legislation to Eliminate the State Income Tax?

[clubboss]

Could you do us a favor and name the five economists.

Thanks.

Need to be careful about ascribing too much to a person with a 'label.'

For example, Senator Mancine [[D-W.V.) who because his state is so conservative, isn't hardly a Dem at all.

I think these are economists -

http://www.npr.org/sections/money/20...liticians-hate

And I think this is the audio of the program

http://reason.com/blog/2016/10/31/th...hnsons-economi

Not sure, I only listened to a couple of minutes of the audio

[emu steve]

Here's a poll of five economists from across the political spectrum:

http://www.npr.org/sections/money/20...nomic-platform

If you want to talk Krugman, I'm assuming you're against "living wages" as well, as he certainly is.

My platform is more 'incremental' than many:

1). Raise the min. wage in steps to $10.10 / hour and higher in med and high wage states.

2). Infrastructure spending to a). meet a glaring need b). produce decent paying jobs.

3). Make more changes to health care law, etc. to make it more affordable to those who are financially at the margins.

4). [[haven't really thought this one through) but maybe new tax policy/zoning policy on affordable housing. Builders need to build moderate as well as more pricey housing. Not every family with husband/wife and one child family needs/wants 5 bedrooms and 4 baths... Three bedrooms and two baths are enough for many folks who don't want to be 'house poor.'

I assume if one talks to most working folks they would cite: 1). Need for my income to rise, 2). My health care costs are too high, 3). Housing costs in many cities, e.g., S.F., NYC, D.C., etc are way too high.

And the one I did not address is the price of college education for when that one kid decides to go to college and mom and dad need to foot the bill.

[Bham1982]

Bham, I don't think you have demonstrated how a higher sales tax hurts low wage earners.

I never sought to "demonstrate" anything that is so blatantly obvious and a core consensus of economists on both the right and left.

How Local Sales Taxes Target the Poor and Widen the Income Gap
http://www.citylab.com/work/2015/01/...me-gap/384643/

If you don't believe something as simple as the fact that poor people utilize a greater share of their resources to consume items containing sales tax relative to the rich, then you have no regard for basic economics, and there's no point in continuing.

Poor people generally have no savings, no investments, no 401k, and they don't consume many things that lack a sales tax. Almost 100% of their income goes to items containing sales tax. Wealthy [[or even Upper Middle Class) people only spend a small proportion of income on sales tax. Much of their income is generated through investments [[0% sales tax), and their employment income has limited exposure to sales tax [[certainly less than 50%, at absolute worst).

A 50% raise in sales tax is very reasonable when that 50% equals a mere three cents.

Yes, because people only spend $1 per year. Obviously you compute the additional sales tax burden by calculating the additional cost for a $1 purchase...

Go interview someone who has spent their life working in a low wage industry and ask them if they would rather pay three extra cents for every dollar they spend, or eliminate money being taken directly out of their paycheck for income tax. They will choose to have a larger paycheck every time. Or will they choose the Bham tax plan?

Again, poor people don't pay income tax. If they aren't idiots they will choose to have more money in their pockets, which means lower sales tax. And it isn't "my plan", as if I just made it up; it's what you learn in the first day of Econ 101. It's like if I say 1+1+2 then it's the "Bham math theory"?

Maybe some rich people have spending habits that are excluded from the sales tax.

Gee, you think? Crazy idea to think that wealthy people would have investments, mansions, landscaping, vacations, medical/health treatments, housekeepers, club memberships, professional advisors, private schooling, tutors for their kids. I always thought their wealth was being drained at the local WalMart and 99 cent store, same as a poor guy. Millions spent per year on socks, laundry detergent and toilet paper, nothing spent at the spa, country club, or vacation home.

If you are poor in Detroit you are richer than 99% of the world, and indeed you are the 1%.

This is nonsense. Dirt poor countries have different cost structures than the U.S. If you're poor in the U.S., you're still needy and could benefit from tax relief.

[clubboss]

My issue is how is this term "poor" defined? Even the poorest Detroiters are much more wealthy than the absolute majority of the world. If you are poor in Detroit you are richer than 99% of the world, and indeed you are the 1%. To call people "poor" when they have so much is self defeating and [[for the most part) it's not true.

This is nonsense. Dirt poor countries have different cost structures than the U.S. If you're poor in the U.S., you're still needy and could benefit from tax relief.

I think its a typo, they can't seriously believe that percentile figure.

[Scottathew]

I'm for this, as long as we responsibly replace the revenue and don't slash funding to schools and municipalities. Tax consumption, not income. If someone wants to save money, let them do it without taxing the money first.

I would also like to see a national sales tax replace our federal income tax. No more loopholes, forms, and tax preparation. Throw it all out. You can't cheat your taxes. When you consume, you pay.

[JBMcB]

I think its a typo, they can't seriously believe that percentile figure.

Median worldwide income per capita is around $10,000 US.

Doesn't sound right, does it? However, the median income in China is around $10,000, and the median income in India is around $1,500. Indonesia, the next most populous country after the US, is $6,000. Those are the two most populous countries in the world. So extrapolate out from that...

[Wesley Mouch]

...snip...

How Local Sales Taxes Target the Poor and Widen the Income Gap
http://www.citylab.com/work/2015/01/...me-gap/384643/

...

Poor people generally have no savings, no investments, no 401k, and they don't consume many things that lack a sales tax. Almost 100% of their income goes to items containing sales tax.

...snip...

Not all states exempt food from sales tax, like Michigan. So the national stories about the regressive effects of sales taxes don't apply in Michigan.

That citylab story says "State sales tax on food and other necessities place a higher burden on poor families"... except that 95% of the US doesn't tax food. Typical of advocacy journalism. So obsessed with the injustice, that they don't bother to fact check. You could call if 'fake news' at CityLab.

So, since we know from other advocacy journalism that poor people spend far too much of their income on food, that the sales tax is in fact progressive in 95% of the US.

http://blog.taxjar.com/states-grocery-items-tax-exempt/

[Hypestyles]

........ so have there been any empirical studies on the long-term impact of this type of tax policy? What does it do for local municipalities, for example?

[ABetterDetroit]

It's just math. It's really not that hard.

The income tax is the single largest annual revenue generater for the State of Michigan with the only exception being Uncle Sam.

A sales tax increase will not come close to covering the short fall of eliminating the income tax.

http://www.house.mi.gov/hfa/Archives...ng_fy14-15.pdf

[drjeff]

Median worldwide income per capita is around $10,000 US.

Doesn't sound right, does it? However, the median income in China is around $10,000, and the median income in India is around $1,500. Indonesia, the next most populous country after the US, is $6,000. Those are the two most populous countries in the world. So extrapolate out from that...

I've lived in India. Somebody making $10,000 is solidly middle class and possibly upper middle. Everything is cheap there compared to here. It's possible to live on $2 a day [[many laborers make 100 rupees a day, which is about $1.50.)

[belleislerunner]

Most of us visit "nicer" communities and come away thinking - wow that place is nice and clean and functions well.

What you might not now are these cities [[e.g. Scottsdale, AZ) charge tax on every purchase - even food in their city - even if state or federal does not. An added 1.65%
http://www.scottsdaleaz.gov/taxes/faq

Even if we just taxed all food universally at 2% - we'd raise a boatload of money for infrastructure.

[Junjie]

Median worldwide income per capita is around $10,000 US.

Doesn't sound right, does it? However, the median income in China is around $10,000, and the median income in India is around $1,500. Indonesia, the next most populous country after the US, is $6,000. Those are the two most populous countries in the world. So extrapolate out from that...

Right. That means that half of the people in China make more than $10,000 per year, which means that in China alone we have 700 million people making more than $10,000 per year. That's equal to 10% of the entire world's population. And then of course we have to take into account the fact that the cost of living [[PPP) in China is about half that of the US - which I can confirm having lived there personally. That means in China alone we have at least 10% of the world population living on the equivalent of at least $20,000 per year.

Then figure that we might have missed some people living at least that well in Europe, Japan, Korea, Russia, India, Australia, Brazil, etc. etc. etc.

So, the idea that a poor person in Detroit [[median income ~$25,000) is richer than 99% of the world is pure fantasy.

[Bham1982]

So, the idea that a poor person in Detroit [[median income ~$25,000) is richer than 99% of the world is pure fantasy.

And you can't compare across currencies, especially between First and Third World.

I can get a solid meal in Latin America for $2 USD. I can have a full-time housekeeper/cook for $5 per day. So, yeah, median household income in Mexico, Brazil, etc. may be quite low, but it isn't remotely comparable.

[Towne Cluber]

Gee, you think? Crazy idea to think that wealthy people would have investments, mansions, landscaping, vacations, medical/health treatments, housekeepers, club memberships, professional advisors, private schooling, tutors for their kids. I always thought their wealth was being drained at the local WalMart and 99 cent store, same as a poor guy. Millions spent per year on socks, laundry detergent and toilet paper, nothing spent at the spa, country club, or vacation home.

Very strange claims that you're trying to make here. First, tells us more about these "tax free vacations" and how we can all take advantage of that opportunity as well. Second, do you really think that service providers, country clubs, tutors, private schools, etc. don't build in the cost of taxes on materials, utilities, etc. to their fees?

[Bham1982]

First, tells us more about these "tax free vacations" and how we can all take advantage of that opportunity as well.

Book a flight, hotel and tour, and look at the bills. There will be no sales tax collected. There are taxes built into these expenditures, but not sales taxes.

Second, do you really think that service providers, country clubs, tutors, private schools, etc. don't build in the cost of taxes on materials, utilities, etc. to their fees?

Whether they do or don't has nothing to do with whether a sales tax is collected.

I have no idea why you would think that salaries for skilled professional are driven by things like "materials" as if a craftsman's or doctor's fees are primarily based on things like hammers and microscopes.

And the answer is no, there is no sales tax for such services.

[ABetterDetroit]

Most of us visit "nicer" communities and come away thinking - wow that place is nice and clean and functions well.

What you might not now are these cities [[e.g. Scottsdale, AZ) charge tax on every purchase - even food in their city - even if state or federal does not. An added 1.65%
http://www.scottsdaleaz.gov/taxes/faq

Even if we just taxed all food universally at 2% - we'd raise a boatload of money for infrastructure.

Most logical post so far.

We don't tax food because it's a necessity and that would be morally wrong yet the tax on rent is so high in our economically challenged largest city that 10s of thousands of people are thrown out of their homes annually. That process has been shown to be very expensive from blight, demolition, failed schools, incarceration, bankruptcy, lost economic activity and opportunity, tax incentives... a truely endless costly problem.

Housing is just as critical as food economically.

[Towne Cluber]

Book a flight, hotel and tour, and look at the bills. There will be no sales tax collected. There are taxes built into these expenditures, but not sales taxes.



Whether they do or don't has nothing to do with whether a sales tax is collected.

I have no idea why you would think that salaries for skilled professional are driven by things like "materials" as if a craftsman's or doctor's fees are primarily based on things like hammers and microscopes.

And the answer is no, there is no sales tax for such services.

Do you not eat and shop on vacation? Let me guess, you pack your own food and don't buy anything else either, right? How did you get to the vacation spot? A vehicle which requires fuel, which has sales tax. Let me guess, you walked? And again, rich people don't buy airline tickets. They use points accumulated through items they purchased on their credit cards. Items they paid sales taxes on. Also, once again, sales taxes paid up front by hotels, etc. for their materials are built in to the cost that they pass on to the consumer. No one is getting a free lunch in that regard.

I have no idea why you think that skilled professionals "may or may not" build in the sales taxes that they pay in advance for materials into their service fees. I also have no idea why you think that those professionals could do their jobs without hammers and microscopes, for which they paid sales taxes. Do you really think they subtract the amount of sales tax that they paid out of the goodness of their heart?

[Trumpeteer]

Surely you know that rich people don't actually pay for airplane tickets. They use credit card points and frequent flier miles.

And those points/miles come from spending MONEY, i.e. CHARGING, on goods and services DUH!!!!

[BankruptcyGuy]

And you can't compare across currencies, especially between First and Third World.

I can get a solid meal in Latin America for $2 USD. I can have a full-time housekeeper/cook for $5 per day. So, yeah, median household income in Mexico, Brazil, etc. may be quite low, but it isn't remotely comparable.

International economists use a measure called purchasing power parity to smooth the calculations for the cost of living in various currency regimes. https://en.wikipedia.org/wiki/List_o...PP)_per_capita
Using that measure, the bottom parts of the US are still in the top 1% of the world.

[Canadian Visitor]

International economists use a measure called purchasing power parity to smooth the calculations for the cost of living in various currency regimes. https://en.wikipedia.org/wiki/List_o...PP)_per_capita
Using that measure, the bottom parts of the US are still in the top 1% of the world.

I apologize if I sound snarky, but I have a serious math problem with the above.

The world's population is more or less, 7.5 Billion people.

That means the top 1%, would be 75 Million people.

As the United States is just over 300 Million people.

The bottom quartile of earners could not possibly exceed the top 4%, and that's if they were richer than the Sultan of Dubai, The Queen of England and Swedish Neurosurgeons. Which seems rather implausible, doesn't it?


*****

Moving on to other arguments in this thread.

Sales taxes are regressive, if applied across all types of goods/services and if no form of low-income rebate exists.

This needn't be the case.

I will leave it to those with more familiarity w/how Michigan does or might operate its sales tax.

But I will offer the Federal Canadian example for a version that's not terribly regressive.

First, it exempts groceries, residential rent on a primary address, prescription drugs, medical devices and children's clothing.

Second, it provides a rebate of the tax, in whole or in part, to low and lower-middle income earners.

Roughly, if you have no kids and $30,000Cdn in income, you get a rebate on the sales tax, when you file your income tax. Said rebate is worth around $500.

As the tax is 5%; and for a low-income earner would likely apply to no more than 1/3 of purchases, its roughly a full rebate.

If you have children, the rebate increases to a peak value of over $1,500

The rebate phases out at around $40,000 for a single person and $60,000 for a 2-child household.

[Canadian Visitor]

The above said; I happen to think blowing a hole in a government budget by dismantling income tax; only to attempt to replace said revenue with another tax doesn't make a lot of sense of its face.

IF:

a) The revenue is not successfully replaced, further tax hikes or service erosion is to be expected and/or the decision will be reversed at great cost.

b) The revenue is replaced; meaning no additional or lesser revenue is collected, what's the gain? All you've done is shuffled how the money is collected and from whom without actually improving anything.

c) If the shift results in lowering the tax burden of those with a healthy income, and shifts that burden to middle and/or low-income citizens, then it is regressive, moreover, it its economically depressive. The economy is centred around consumer spending in the United States [[and most developed nations). A person earning 200k per year, who ends up with 2k in extra disposable income is mostly likely to bank it/invest it, rather than spend it. While at the low-income end of the spectrum, ever disposable dollar is plowed back into the economy, because people aren't meeting their most basic needs; and have oodles of unfulfilled aspirations. Ergo, it is more economically stimulative to add money to a low-income earners balance sheet and a well-off one. At least up to a point.

[Zozo]

Bham,

I don't believe there is consensus from economists on the left and right about the sales tax issue. If everyone agreed, it would be so "blatantly obvious" that all states would have the same sales and income tax policy. But they don't, therefore therefore is no consensus on the consensus of your experts, and the issue is open to debate.

Poor people use a greater share of their income in making sales taxable purchases not because sales tax is high, because it is not, but because they don't make much money to begin with. Do away with the income tax and they will be able to keep more of they money they earn.

Of course poor people don't just spend a dollar a year. But how much money do poor people spend in sales taxable items a year? What's the average? I doubt even middle class people spend more than $10K per year in sales taxable items. That adds up to a $900 sales tax per year. Most likely around $500 a year for poor people. Seems reasonable. If not, should we really be setting state policy on people who can't afford $500 in taxes a year anyways? Large purchases, such as home and vehicle, are mostly financed and sales taxes on these types of items just get added to the note, if applicable at all. There are also tax credits available for these large purchases too.

Yes, rich people have mansions, landscaping, vacations, medical/health treatments, housekeepers, club memberships, professional advisors, private schooling, tutors for their kids, etc... but there are all kids of costs and fees associated with these things, and your rhetoric suggests you think rich people are getting away with something. And no one is getting their wealth drained away by purchasing toilet paper at Walmart... what does that come to anyway, a five cent sales tax?

If you don't think poor people in Detroit are rich compared to poor people in other parts of the world, just throw a dart at the map and take a trip to wherever the dart lands. You will find pure human misery closer to the experience of an animal. Poor Detroiters [[and Americans for that matter) have a lot to be thankful for.

[Canadian Visitor]

Bham,

If you don't think poor people in Detroit are rich compared to poor people in other parts of the world, just throw a dart at the map and take a trip to wherever the dart lands. You will find pure human misery closer to the experience of an animal. Poor Detroiters [[and Americans for that matter) have a lot to be thankful for.

Compared to where again?

Canada [[2nd largest land mass/country on the globe)
Australia [[3rd)
Russia [[1st) ?

Or how about virtually all of the balance of Europe?

With the greatest of respect........

Complete and utter drivel!

Yes the poor in Indonesia are worse off than those in Detroit [[athough less likely to be murdered) [[by a factor of six)

But that is not reflective of the globe as a whole.

Moreover, how does comparing the situation of the poor in the richest [[large) nation on earth with those in the poorest justify the circumstances of same?

It doesn't.

Period.

[Canadian Visitor]

Let me again add, that tax policy outcomes are never objectively right or wrong.

You have to pick a goal[[s).

If what you want is to protect inherited wealth, you don't tax inheritance.

If you want is for people who work hard to achieve for themselves to move up, you do tax inheritance so that you can exempt low-income earners from income tax.

If you want to promote the house-flipping industry you exempt all homes from capital gains tax.

If you think the flipping industry doesn't do much that's useful for the broader economy you subject it to capital gains tax.

etc. etc.

'Experts' disagree not because the facts are in dispute, but because some favour one set of facts over another.

[ABetterDetroit]

Let me again add, that tax policy outcomes are never objectively right or wrong.

You have to pick a goal[[s).

If what you want is to protect inherited wealth, you don't tax inheritance.

If you want is for people who work hard to achieve for themselves to move up, you do tax inheritance so that you can exempt low-income earners from income tax.

If you want to promote the house-flipping industry you exempt all homes from capital gains tax.

If you think the flipping industry doesn't do much that's useful for the broader economy you subject it to capital gains tax.

etc. etc.

'Experts' disagree not because the facts are in dispute, but because some favour one set of facts over another.

Thank you for putting this basic truth about tax systems into a few words CV.

Too often, like this thread illustrates, any dialog on taxes forgets what is the least harmful to the overall economy and just turns into "who else needs to pay more so I can pay less."