Quote:I have an issue with this. For one, it creates a massive loophole on the biggest purchases (and therefore, the highest tax generators). Would a house be considered "used"? Because the overwhelming majority of home purchases in this country are "used" homes. Cars are another example.

 

It also opens the door to lots of fraud, which would make dismantling the IRS much less feasible. It would be difficult to sell new cars, for example, as used and get away with it, but lots of mom 'n pop shops would abuse the hell out of this provision. It would be a piece of cake for, say, Play It Again Sports to bring in a few new bikes and sell them as used to help customers dodge the tax (and bring in more business as a result), and with a greatly diminished IRS force, it would be difficult to assign enough auditors to catch those sort of small-scale cheats. Additionally, it'd be all but impossible to prove that the end user who ultimately got out of paying the tax was aware that the product was new. All they have to do is say, "The salesman told me it was used," and they're off the hook in almost all cases.

 

An additional problem is that it would slow manufacturing down in this country. If I could buy a brand new car and pay 35% sales tax on it or a pre-owned car that was a corporate fleet vehicle for a year, has 8,000 miles on it and is otherwise in nearly-new condition (how I got my car) and pay nothing, I'm going for option two. You'd see new car sales fall off, which would result in dealers increasing the price of used cars to make them less expensive--possibly making it cost more to buy a certified pre-owned car than to buy a brand new one of the same make and model. It would artificially screw with the market. Instead, just apply the tax evenly and let the marketplace figure itself out from there.

 

IMO, there shouldn't be any distinction between new and used items when applying a consumption tax. Too many opportunities for fraud and unpleasant side effects.