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.

 

1.) The purpose of the concept was to ensure against double taxation.  In other words, once a good has been brought to market and taxed it shouldn't be taxed again.  

 

2.) There would have to be an enforcement mechanism.  At the same time instead of having to manage 150 million returns and every detail of everyone's life they would be focused on the companies bringing new goods to market.  

 

3.) I think that in the case of the bike, the company that makes the bike would have to show two things, the bikes they made and who they sold them too.  that's a lot less cumbersome than a 70k page tax code.  

 

4.) The TAX FREE sign on the Mom and Pop shop would be a little piece of gold.  That means that they wouldn't have to file a return on any profits to the tax service and they would only have to comply with inventory.  I don't think a lot of people would want to screw that up.  

 

5.) The new car already costs a lot more than the used car.  In most instances New products and new construction market based on quality over used items and concede the fact that they are probably priced higher. There is a limit to how far this goes and that brings me to my next point.

 

6.) Producers of new goods and services would be under new market pressure to manage costs and that will help to ensure one of the intended benefits of repealing all of the EMBEDED Taxes in the delivery of goods to the market. When you apply the consumption tax after you strip away what was previously embedded, the new after tax price should be roughly congruent with what you were paying before.  So if you have an item that cost 1000 before the idea is that now the company would only be looking for 750 pre tax.  

 

Again, there are some draw backs, and i think that while it makes sense on paper, people would have to see the pre-tax numbers come down to maintain the same ratio for the price of new goods to the price of used goods and at least be able to see how you could find an equilibrium point or the system wouldn't work.

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Most states have a mechanism to reduce double taxation on goods sold for resale as it is...

 

So for instance, if you are a retailer, you buy from the wholesaler, present a certificate to the wholesaler that says "don't charge me tax, I'm gonna pass it off to the consumer", and then when the retailer makes his sale, the "Sales tax" is charge to the "end user".

 

In New Mexico, that certificate is called an NTTC and can only be issued by the state.  If you don't have that NTTC and are audited, you're hosed.  

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Most states have a mechanism to reduce double taxation on goods sold for resale as it is...


So for instance, if you are a retailer, you buy from the wholesaler, present a certificate to the wholesaler that says "don't charge me tax, I'm gonna pass it off to the consumer", and then when the retailer makes his sale, the "Sales tax" is charge to the "end user".


In New Mexico, that certificate is called an NTTC and can only be issued by the state. If you don't have that NTTC and are audited, you're hosed.

Same thing in Florida I don't pay taxes on parts i sell to customers

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The topic title says it all.  Taxes have been brought up in other threads, so perhaps a discussion on different ideas regarding taxes is in order.

 

I personally am a big supporter of going to a consumption based system of taxation, specifically The Fair Tax Act rather than an income based solution.  This would solve several things, but off the top of my head here are a few major points.

 

1.  EVERYBODY would pay their "fair share" based on what they spend for goods and services.  That means that not only the rich person buying a fancy new car or yacht, but also the drug dealer buying a new car or new rims for said car.  The same could be said of the prostitute buying clothes, makeup, etc. which leads me to my second point.

 

2.  Those in the "underground economy" would also be contributing.  Not only drug dealers, thieves or prostitutes, but also the MANY illegal aliens in our country that need to buy things.

 

3.  It would abolish much if not all of the IRS.

 

Discuss.

I'm liking this provided the process is monitored and verified...

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