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A friend told me today what he had heard on the radio while driving.  It seems that President Obama had suggestions for ways to curb the deficit, one which would lower the tax on food items by .5% and double the tax on all other items.

Now, I did not hear that particular program myself, but I can believe that that would be one idea to get a hold of this country's rampant deficit.

However, I, and as it appeared, many callers to the show disagree with that idea. Let's take a look why this is NOT a good idea to implement:

 

  1. It makes no sense to make one group of products cheaper while doubling the tax on all the other items. While initially the government may make money on that, in the long run, items such as clothing, non-food consumables and others, not talking about luxury items here, but items that all of us use on a daily basis, will be taxed out of reach. That half percent reduction in food taxes does not really make a difference in the grand scheme of things. If your current sales tax is 8% now, one half percent brings it down to 7.5%, which is .5 cents on the dollar. Doubling the tax on everything else would take the same 8% currently to 16% then. It may not make a difference on a dollar purchase here and there, but when you shop hundred's of dollars, like going school supply shopping for children, then the tax amount goes from $ 8 to $ 16 for every $ 100 spent. That additional $ 8 could be better spent for more supplies rather than taxes. Increased taxation would also make it harder for American companies to sell their product, because they cannot match the cheap labor costs for production in Asia and Africa, like wise with the cost if inventory. So that could potentially cause more American manufacturers and producers to go out of business, because they cannot compete with the cheaper piced imports. Is that what we really need??? More of our jobs going down the tube? Think about it: 1 pair of shoes, American made, for $ 25 before tax, another pair, identical to the American made, but made in China, Taiwan, Malasiya or wherever, for $ 12.75 before tax. If you had to count your pennies, which one would you buy? Tax= $ 25 x 1.16 = $ 29 ($ 4 for tax), $ 12.75 x 1.16 = $ 14.79 ($ 2.04 for tax). It is pretty obvious from the numbers alone which one I would buy, not because I am anti-American, but because the that is what my budget dictates makes more sense for my to buy with the money available. So we, the government, would be taxing ourselves right out of jobs that we cannot afford to loose. And... while the food tax goes down, the food prices would still go up due to the doubled taxes on everything else, since the producers also have to pay the extra tax on the goods and service they use to make/grow our food, because they have to pass their increase in production cost on to the consumer in order to stay in  business themselves, which would lower the chances of pay raise for their employees. So where does that leave us?
  2. Increasing the taxes will not balance the budget. The only thing that balances the budget is stop spending money on useless programs. While I am all for education, stop spending money on frivolous research grants. Stop sending money overseas to countries that back-stab, like China, who talked about the US when we had the deadline crisis about the debt rating. Why are we giving them millions of dollars when they ridicule us? Same with Russia. Don't get me wrong, individually, as a people, there is nothing wrong with the Chinese and Russians, but their governments need to remember who pulled their chestnuts out of the fire on more than one occasion, politically and economically speaking. It is a fact that when the income increases, the spending increases right along with it. I am quite sure that when people get a pay raise, that their spending goes up too, maybe not immediately, but soon there after. Maybe at first it isn't even apparent, but eventually, the money coming in is still not enough to keep up with the money going out. So where will the extra income that would be created by the tax increase go? To  curb the deficit? I don't think so.

 

I don't know about anyone else, but within my circle of family and friends, most of us live paycheck to paycheck. the way it is right now, the coming paycheck is spent before it is even gotten. So taxing us more on goods and services is not doing any of us any favors.

The ONLY way that the budget will be balanced and the debt will be paid, is by creating jobs for the unemployed and the students that are finishing their schooling, stop companies from shipping our jobs overseas to a cheaper work force, getting rid of moochers, both individuals and companies, as well as countries, and to stop throwing our money away.

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Comment by sabine.daheim on November 25, 2011 at 7:14am

http://en.wikipedia.org/wiki/FairTax#Sales_tax_rate gives information about the different  proposals

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