Consumption could replace tax on income | Superior Telegram

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Consumption could replace tax on income

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Gov. Scott Walker has again broached the subject of eliminating the income tax. Several books and studies have shown most states without income taxes have better performing economies than those that have one.

A consumption tax could replace the income, corporate, gift, estate and capital gains taxes. The main reason is its simplicity. The only people filling out tax forms would be those that sell a new product or a service. We should not pay a tax on used items.

Another reason is that it’s difficult to hide from a consumption tax — 90 percent of purchases are made at “big box” stores where the cashier would have to help you cheat. Workers paid in cash and criminals could not hide from the sales tax.

The larger the tax base is the lower the rate we could have. That means there should be little or nothing exempted from the tax. The simpler a tax system is the better for all of us meaning we should promote a single tax rate for all retail activities.

There are nine states without an income tax. Their sales tax rates vary from zero in Alaska to 7 percent in Tennessee. Local sales taxes add as much as 3 percent in Washington. Wisconsin’s rate should fit in there somewhere.

Since businesses are unable to pay a tax without adding the cost to the price of their product, business purchases should be tax-free.

If governments did not pay the consumption tax, they might under bid all private contractors on all government jobs. Therefore, it is reasonable to charge the government the consumption tax on its purchases.

But, if you like your income tax, you can keep your income tax.

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