and realized my shirt was on the other side of my bed, so I bent over the bed to get it and looked in the mirror. My hips are SO freaking big. When I bend there is a HUGE dip between my hips and my ribs. I really do love my body but that is the one thing I hate about it.
Tax day has come and gone, and with it the most frag grenadey of modern protests, the annual tea parties. And while we will still hear them for another year in the bizarre ramblings of political pundits, I thought it would be nice to examine one of their proposals, pertinent to this past Wednesday: Consumption Tax. Now this isn’t a tax on people with tuberculosis, it’s the idea that instead of the income tax (which opponents say is unfair, unconstitutional, and uncool) the government’s taxation should be folded into every sale (wholesale or retail) so that people who spend more would pay more. That sounds immensely fair, until we start to look at what that would mean:
A: Things become more expensive
While items actual cost would (initially) remain unchanged, the effective price would be increased by the amount of the tax. But not just the amount of the tax, the amount of the tax on every step of production. for example consider buying a Latté. (also imagine we can grow coffee beans in the states) First the coffee plantation sells the coffee beans to a distributor (x in Ctax) the distributor sells beans to a chain (2x in Ctax) we don’t really have chain owned stores anymore, so the chain sells to your local franchise (3x in Ctax) the chain brews the coffee and adds milk [farmer-dairy-supermarket chain-supermarket franchise for 4x in Ctax] (7x in Ctax) and then sells it to you (price of a latté+8x the consumption tax) that’s just for coffee, imagine the higher cost of a car, or a house, or a hilarious novelty chess set. Oh, and I totally forgot about the cup. Well just assume they pour it directly into your mouth.
"But", you’re saying to yourself in the mental play in my head (ps you are also wearing a Marie Antoinette wig) Shouldn’t we just pay 1x the consumption tax? we’re only buying 1 thing…" To that I say, first off, don’t finish a sentence with an ellipse at me. Second, businesses, as a matter of not only routine, but basic economic principle, push taxes on to their consumer. So while the coffee farmer doesn’t really have to worry about it, the manager of the cute barista could soak 7/8ths of the tax accrued, or just gather 8/8ths of it from you to offset their costs. (also the cost of therapy for the cute barista who first has to pour a latté down your throat, but then has to deal with you making insane chit-chat to them, with half a latté dribbled down your front. Really, use a cup next time weirdo.
So things would become more expensive, but only a little more right? Nope. Well, initially yes, but a. those pennies add up, and b. if everyone assumes things are getting more expensive then a little price gouging wouldn’t hurt right? But, unless you’re a business owner none of that scratch goes to you (or the poor tramatised barista) So your wages would stay the same. And that means you could buy less with them, because everything’s more expensive.
Imports would soar. See they wouldn’t have to pay all these levels of taxes, they would just go manufacturer-market-you which is a much quicker (i.e. cheaper) method than what their competitors stateside would have to deal with: resources-parts-f*%$ing John Madden-manufacturer-market-you. So they could try Tariffs, but the WTO would smack those down faster than you could get your head to twirl. Even if the Tariffs stood, a thriving black market would spring up to get around the Taxes.
So, you options are: buy less of the OMFG expensive goods with your pitiful wages, buy Imported, buy black market. Notice that all of these options result in the tax not bringing in enough moneys. Remember that.
You’re reading this instead of having a breakdown about how I’m spitting in the face of Adam Smith (he and I are buddies btw) so I’ll assume that you’re on the younger side of adulthood. The consumption tax totally blows for you, much more than for those damn baby boomers (with their hair and their clothes and their rock and/or roll music) It’s a raw deal because think of all the things you have to look forward to in life, going in a little debt buying a car, going in a little debt paying for a wedding, going in a little debt for college, going in a mountain of debt for buying a house. Now, imagine all those things are more expensive. (especially the car and house)
now look over at your parents. They’ve already bought a house, five cars, 17 marriages (this’ll be the one that sticks) and college, all at rates that were not only cheaper in real dollars at the time, but didn’t have this extra consumption tax adding who knows how much to every purchase they had to make. While you could do the import/black market thing for some of life’s expenses, (have your wedding in Jamaica, buy a Saab, I’d actually kinda like to see a housing black market) It wouldn’t work for everything. You would be able to afford less, and every big purchase would rip through your savings account so that when you finally are able to retire, well, you won’t be able to retire.
That’s not all.
There’s a pretty universal perception that young people sit around and burn their money trying to light their farts. (look it up in wikipedia) So, when (as mentioned before) the tax doesn’t bring in enough money to run the government, special extra taxes will almost certainly be applied to anything that people flush with babysitter money spend it on. Sure there will be “sin” taxes on smoking, but targeted taxes will almost certainly be levied against particular demographics who are perceived to “not care” (that’s you)
So it’s too hard to make ends meet, so you go to a charity right? Wrong, non-profits (charities) right now have a benefit of not having to pay corporate income tax, or sales tax on items used by the charity. While they still wouldn’t have to pay the corporate income tax, there would be no way to remove the consumption tax from any items purchased for the charity. (i.e. charity dollars go far less) Also remember that whole bit about your effective income shrinking? Anyone who donates to charity would have to donate less effective money, and less of it. (man, the phrase “less effective money” is kinda depressing)
I mentioned the Corporate income tax, well, that would be gone, and guess who would be picking up that bill?
C Overall Economics
So, we’ve put together a system where we’ve created a fake inflation (that still has all the lovely effects of real inflation) and the resulting taxes generated are less than we started with. Money is worth less and everything is more expensive, The housing market is about to collapse because who can afford a new house, with all the little pieces involved) Imports are through the roof, but our own production is stagnant because only a fool would pay all the extra taxes to buy American. Anything else?
oh, yeah, the State Government’s carefully balance tax arrangements would be basically napalmed.
States that have an income tax, well, in order to get rid of the federal income tax a constitutional amendment would have to be passed. While, in theory, this wouldn’t apply to states, in practice barely any business operates with out interstate commerce, and if interstate commerce comes into play, then the feds are back in the game. (i.e. people would sue in federal court to strike down the state income taxes) so what are they gonna do, institute their own consumption tax, adding to the problem? Yes, probably.
But some states have a sales tax instead of/in addition to the income tax. Well, sales would be tanking, therefore their coffers would be bleeding too.
Yay! everyone wins. or loses, one of the two.
any other broad economic fall out? (of course)
Companies would take in all the methods of production on their products. this would cut the Consumption tax they would have to pay, and they’d be able to sell for slightly cheaper, and rake in all that juicy profit. Unfortunately, these monolithic companies stifle innovation (because it would cost more to do it outside the structure) and stifle new entrants to their industry (because the cost of startup would be astronomical)
D. What have we learned?
So I’m going to finish with two factual observations about the arguments of those proposing this new system.
1. The Income tax is “unconstitutional”
Well, it was, so they made an amendment saying they could, 3/4s of the states ratified, and boom, it became constitutional. The same argument could be made that women voting is unconstitutional, or the vice president succeeding the president is unconstitutional, or that states have rights is unconstitutional. If it’s an amendment, it’s actually part of the constitution.
2. Taxes are bad, and we’re the only ones saying anything about it.
This is the truly original idea that tea party protesters are the first people to not like paying taxes. No one likes paying taxes, but, yo, it’s your civil duty man. Also, just for the record, a consumption tax was tried in America once before. You know how the people reacted? They dressed up as Native Americans, stormed on board the import ship, and threw all the tea into Boston Harbor. Yes, the original Tea Party was a protest against a consumption tax. not even a universal consumption tax, just one that effected their afternoon gossip gab-fests.
I was modeling in the life drawing class at HCC tonight, and the instructor asked for a long pose for the rest of the night. no sitting pose was really that interesting, so I asked if I could knit on the knitted nude that I had started yesterday. She said yes, so I spent the next three hours nude, knitting a nude photograph, I more than doubled the progress I had made :)