Grocery Tax

[Neptune]

From KTUL

Oklahoma City - The Oklahoma House of Representatives has passed its own version of a grocery tax bill that would lower the state's tax on groceries to half a percent by 2017.

House Bill 2204 would gradually lower the grocery tax by a half percent over the next seven years.

"My constituents and most Oklahomans have continued to express a strong desire to see the end of the state grocery tax," said Republican Representative John Trebilcock of Broken Arrow. "It's wrong to tax the food we eat - to me it is a moral issue. The government should not tax necessities we need to live. Taxing food is like taxing the air we breathe."

Trebilcock expects to have better success with his bill than a similar bill to completely eliminate the state grocery tax.

"Repeated efforts to kill the tax have failed," Trebilcock said. "It is my hope that my legislation will succeed because it lowers the tax rather than completely eliminate it and it would do so gradually, so as to allow legislators to find ways to streamline government to support any loss of revenue."

Trebilcock believes lowering the tax would have the potential to bolster the state's economy and would help all struggling Oklahomans.

"In hard economic times, many people cut back on their spending, but they cannot cut back on the basics," Trebilcock said. "My legislation would give them some relief and, for those with any extra spending money, might encourage them to spend it more. Lowering the tax would also attract residents just outside the border in other states, to spend their money here."

House Bill 2204 passed the House by a 80-16 vote and now proceeds to the state Senate.

[sgrizzle]

I assume they meant to say that it would eliminate the tax by lowering it by half cent increments over 7 years. As it is now, it's saying after 7 years the tax would be half a cent lower.

Regardless, he may have better luck but that seems TOO long of a phase in.

[cannon_fodder]

I'm against it.

The next fight will be what counts as a grocery (my apologies to people who have read this rant before).   Is pop (largely responsible for obesity)?  If pop, what about beer (healthier than pop)?   Junk food like chips and cookies? What about a pumpkin sold as a decoration and not as food?  Gum? 

If you by a ham sandwhich from the deli it is taxed, if you buy 2 slices of bread, 6oz of ham, and 2 slices of cheese it is tax free.  What about frozen meals?  If those are tax free can I buy a frozen burrito from QT and not microwave it to save 8%?

Then if food, why not drugs?  People need drugs.  Of course, people also need cloths, so no tax on cloths.  But only cloths you really need (state decides that I guess). 

Bah!  I'll cut it short.  You've all heard the rant before.   It is not more unfair to tax food than anything else we "need."

[swake]

I'm against it.

The next fight will be what counts as a grocery (my apologies to people who have read this rant before).   Is pop (largely responsible for obesity)?  If pop, what about beer (healthier than pop)?   Junk food like chips and cookies? What about a pumpkin sold as a decoration and not as food?  Gum? 

If you by a ham sandwhich from the deli it is taxed, if you buy 2 slices of bread, 6oz of ham, and 2 slices of cheese it is tax free.  What about frozen meals?  If those are tax free can I buy a frozen burrito from QT and not microwave it to save 8%?

Then if food, why not drugs?  People need drugs.  Of course, people also need cloths, so no tax on cloths.  But only cloths you really need (state decides that I guess). 

Bah!  I'll cut it short.  You've all heard the rant before.   It is not more unfair to tax food than anything else we "need."

Most states don't tax unprepared food, I think we can figure it out too.

I thought the lowering of the top income tax rate over the last few years was a joke, but this is something we should do. It's wrong to tax basic foodstuffs and hits the poor and elderly disproportionately hard.

I'm not sure this is the right time to do with the state facing a potential budget crisis. But. With oil already going back up the state should soon be flush with oil money again and if the right side of the isle wants tax cuts, this is the right place to make them. It would put money back in everyone’s pockets and make the poor and elderly more food secure.

And if the state wants to keep cutting taxes I would also be in favor of the state giving a half a cent or so of it’s remaining sales tax to cities and counties so that they would also be able to give up taxing groceries and giving up a few cents of the gas taxes to local governments for local roads.

[cannon_fodder]

It's wrong to tax basic foodstuffs and hits the poor and elderly disproportionately hard.

Clothes are basic items we need (or do we not tax cloth and you can make your own? Which leads to most peoples ability grow vegetables).  We also need fuel to heat our homes and to drive.  We need prescription drugs.  We need eye glasses.  All are basic items that are taxed.

And it doesn't disproportionately tax anyone.   You pay tax on what you buy.  The "poor" are using food stamps and WIC so they are not paying anything.   If you remove the tax entirely you are subsidizing George Kaisers need to eat Lobster everyday to the tune of 9%.  Proportionally, you would save rich people more money on taxes than poor people (aforementioned poor people using government programs and poor people spend MUCH less on groceries than rich people).  So why is it more fair to tax me on my clothing than it is to tax me for food?

Additionally, do you think the state is going to just forgo this revenue?  Do you think they will cut spending to offset it?  Of course not.  They will simply raise taxes somewhere else.  I'm against taxes in general.  I think the government misuses hordes of money and takes it out of the economy in ways that are not related to the use (tag fees going to schools instead of roads).  But if you are going to have a sales tax, just have it be a blanket sales tax.

Odds of someone sticking in provisions that make [insert ridiculous thing here] legally a grocery item?  Seriously, is pop a grocery item?  Then why not "non-intoxicating" beer? 

[Gaspar]

You are exactly right as usual CF.  "Use" taxes are the only fair taxes.

If I buy all of my groceries at Petty's I'm going to pay a hefty amount of tax.

If I am poor or elderly and buy only the basics at Wal Mart I am going to pay very little. 

If I am on Government assistance, I am going to pay nothing.

Other forms of taxation hit the poor and elderly much harder.  For instance when the government increases income/corporate taxes, the cost of doing business increases, and those expenses are passed directly to the consumer. 

This is a timely discussion because I have a small interest in a food manufacturing operation, and we recently got hit by a price increase from our main supplier in anticipation of the new tax structure.  So what did we do?  We raised the price of our product to cover the expense.  We are now hearing from some of our other ingredient suppliers that they will be raising their prices as well, so we will probably raise the wholesale price again in the next few weeks.

Our retailers don't even blink at this, they simply raise their retail price.  The only person affected is the consumer.  You see Swake, "evil" companies don't pay taxes, people do.

[cannon_fodder]

One more thing, then I'll shut up on the issue:

Sales taxes and tolls are the most unpopular taxes.  Even though they are a minimal percent of tax revenue.  Why?

Simple:  the government is smart enough to know that money taken directly from your paycheck doesn't count as a tax in your head.  You never see it, it's just gone.    Property taxes are generally out of an escrow account or otherwise part of the expense of owning a home. 

Sales taxes are right there.  You know that 9% of every dollar you spend goes to the government.  It prompts people to ask what that money is going towards and if it is being used wisely, if only for a second.

If the sales tax is raised .33% people notice.  If your income tax went up 3% and no one told you, most people wouldn't even notice.  The money just disappears.  FICA, Medicare, State, Federal, insurance premiums, IRA contributions . . . what's another 3% out of your check?

I want taxes to be as up front as possible.   Eliminating this tax and sticking it in somewhere else won't help that cause either.  For that matter, having an income tax AND a sales tax seems ridiculous.  You tax my money when I earn it, then again when I spend it?  What the hell.

[Red Arrow]

Sales tax is visible because it shows as a line item on your receipt.  If it were included in the price on the shelf, you wouldn't pay any more attention than to your income tax.

[swake]

One more thing, then I'll shut up on the issue:

Sales taxes and tolls are the most unpopular taxes.  Even though they are a minimal percent of tax revenue.  Why?

Simple:  the government is smart enough to know that money taken directly from your paycheck doesn't count as a tax in your head.  You never see it, it's just gone.    Property taxes are generally out of an escrow account or otherwise part of the expense of owning a home. 

Sales taxes are right there.  You know that 9% of every dollar you spend goes to the government.  It prompts people to ask what that money is going towards and if it is being used wisely, if only for a second.

If the sales tax is raised .33% people notice.  If your income tax went up 3% and no one told you, most people wouldn't even notice.  The money just disappears.  FICA, Medicare, State, Federal, insurance premiums, IRA contributions . . . what's another 3% out of your check?

I want taxes to be as up front as possible.   Eliminating this tax and sticking it in somewhere else won't help that cause either.  For that matter, having an income tax AND a sales tax seems ridiculous.  You tax my money when I earn it, then again when I spend it?  What the hell.

Ah, flat taxers.

You all need to consider the economic impact of a 20%+ VAT (or however else you want it applied) on the economy. It discourages the purchase of everything and will drive large parts of the economy underground. It places the entire tax burden on wage earners (do you really think companies are going to pass tax savings on to workers or consumers?) and is a completely regressive model in that it shifts the tax burden largely to anyone that lives paycheck to paycheck, which today is nearly half the population and after the dramatic increase in the cost of goods in this model that number will grow to way over half.

If the rate is 20%, then the poor will pay 20%, the middle class 20%, upper middle class with some savings and investments? 15-20% and the wealthier you are and the lesser percentage of your income you spend the less you pay. It's going to flip the tax burden first entirely to people from companies and then from the wealthy to everyone else.

It will destroy the middle class and transform this country quickly into a third world like nation of haves and have nots.

And I simply don't buy the 20% rate. The average tax paid on income alone is about 13%, if you replace corporate taxes and all the fees the federal government charges you are likely up to 25%-30% sales tax with the flat tax, and that's before the 8.375% local tax we have here. Taxes on goods sold would approach 35% and you still would be taxed with a %12.4 medicare and SS payroll tax (but only on the first $102,000 of income) and any state income taxes (5.25%).

The wealthy would end of paying far less, companies would pay nothing but the rest of us would end up paying 35-40% on everything after paying an income tax of about 18%. Combined anyone making under something like $100,000 a year would pay a total tax rate of 50-60% of income.

That sounds great.

And none of that takes into account the regressive impact of the tax on the economy because it stifles commerce.

It's a bad, bad, bad idea.

[Gaspar]

Ah, flat taxers.

You all need to consider the economic impact of a 20%+ VAT (or however else you want it applied) on the economy. It discourages the purchase of everything and will drive large parts of the economy underground. It places the entire tax burden on wage earners (do you really think companies are going to pass tax savings on to workers or consumers?) and is a completely regressive model in that it shifts the tax burden largely to anyone that lives paycheck to paycheck, which today is nearly half the population and after the dramatic increase in the cost of goods in this model that number will grow to way over half.

If the rate is 20%, then the poor will pay 20%, the middle class 20%, upper middle class with some savings and investments? 15-20% and the wealthier you are and the lesser percentage of your income you spend the less you pay. It's going to flip the tax burden first entirely to people from companies and then from the wealthy to everyone else.

It will destroy the middle class and transform this country quickly into a third world like nation of haves and have nots.

And I simply don't buy the 20% rate. The average tax paid on income alone is about 13%, if you replace corporate taxes and all the fees the federal government charges you are likely up to 25%-30% sales tax with the flat tax, and that's before the 8.375% local tax we have here. Taxes on goods sold would approach 35% and you still would be taxed with a %12.4 medicare and SS payroll tax (but only on the first $102,000 of income) and any state income taxes (5.25%).

The wealthy would end of paying far less, companies would pay nothing but the rest of us would end up paying 35-40% on everything after paying an income tax of about 18%. Combined anyone making under something like $100,000 a year would pay a total tax rate of 50-60% of income.

That sounds great.

And none of that takes into account the regressive impact of the tax on the economy because it stifles commerce.

It's a bad, bad, bad idea.

Regressive?  Tax burden on the lower and middle income?  Nope.

The FairTax actually eliminates and reimburses all federal taxes for those below the poverty line. This is accomplished through the universal prebate and by eliminating the highly regressive FICA payroll tax. Today, low and moderate income Americans pay far more in FICA taxes than income taxes. Those spending at twice the poverty level pay a FairTax of only 11.5 percent -- a rate much lower than the income and payroll tax burden they bear today. Meanwhile, the wealthy pay the 23 percent retail sales tax on their retail purchases.

Under the federal income tax, slow economic growth and recessions have a disproportionately adverse impact on lower-income families. Breadwinners in these families are more likely to lose their jobs, are less likely to have the resources to weather bad economic times, and are more in need of the initial employment opportunities that a dynamic, growing economy provides. Retaining the present tax system makes economic progress needlessly slow and frustrates attempts at upward mobility through hard work and savings, thus harming low-income taxpayers the most.

In contrast, the FairTax dramatically improves economic growth and wage rates for all, but especially for lower-income families and individuals. In addition to receiving the monthly FairTax prebate, these taxpayers are freed from regressive payroll taxes, the federal income tax, and the compliance burdens associated with each. They pay no more business taxes hidden in the price of goods and services, and used goods are tax free.

How can the FairTax generate lower net tax rates for everyone and still pay for the same real government expenditures? The answer is two-fold. Firstly, the tax base is dramatically widened by including consumer spending from the underground economy (estimated at $1.5 trillion annually), and by including illegal immigrants, those who escape their fair share today through loopholes and gimmicks. In addition, 40 million foreign tourists a year will become American taxpayers as consumers here.  Secondly, not everyone's average net tax burden falls.  For households whose major economic resource is accumulated wealth, the FairTax will deliver a net tax hike compared to the current system.

Consider, for example, your typical billionaire, of which America now has more than 400.  These fortunate few are invested primarily in equities on which they pay taxes at a 15 percent rate, whether their income comes in the form of capital gains or dividends.  In addition to having the income from their wealth taxed at a low rate, the principal of their wealth is completely untaxed either directly or indirectly.  Assuming they and their heirs spend only the income earned on the wealth each year, the tax rate today is 15 percent.  In contrast, under the FairTax, the effective tax rate is 23 percent.  Hence, the very wealthy will pay more taxes when the FairTax is enacted. In a nutshell, those who spend more will pay more but low, moderate and middle income taxpayers will benefit from the greatest gains in reduced tax liabilities.

[Gaspar]

Also does a few other good deeds.  The wealthy pay more and the poor pay less because much of the spinning wheels are eliminated.  It would cause much distress for accounts and attorneys that rely on the complexity of the current system for their income.

    * Enables workers to keep their entire paychecks
    * Enables retirees to keep their entire pensions
    * Refunds in advance the tax on purchases of basic necessities
    * Allows American products to compete fairly
    * Brings transparency and accountability to tax policy
    * Ensures Social Security and Medicare funding
    * Closes all loopholes and brings fairness to taxation
    * Abolishes the IRS

[swake]

That’s a bunch of hooey. The federal poverty rate is something like 22k for a family of four. But a family of four making a paltry 50k now is going to pay almost a fourth of their income in federal taxes alone? That is the definition of killing the middle class.

As for making up the difference by taxing spending by foreign tourists, first that’s ludicrous that there’s any real amount of money to be taken in there. And if this country had a 30% sales tax rate (or whatever the local rate plus your 23% would end up being, here it would be 31.375%) WE WOULD HAVE NO FOREIGN TOURISTS SPENDING MONEY.

Next, good lord. Illegal immigrants? How much do you think illegal immigrants make, aren’t they already are poor? And for that matter, hasn’t the complaint been that they send CASH back to their home country and it doesn’t stay (and get spent) here? If they are making $8 bucks an hour how much would they possibly pay after sending half of it back to Mexico? For that matter, why should they be more legal in paying taxes when buying or selling goods as they are in paying income taxes?

As for the billionaire argument, lets do some really simple math. Let’s say, for your arguments sake a person has a billion dollars in equities taxed at a 15% rate. If that billion dollars earned a 10% return for the year and they paid only 15% on that it would be $15 million in paid taxes. That would mean that at the claimed 23% “fair tax” rate that billionaire would have to spend over $65,000,000 dollars in a year to get the same return on taxes. Even Michael Jackson doesn’t spend $5 million a month. Reality is, even a billionaire on a spending spree isn’t going to pay nearly as much, if he were to buy an $8 million house and a few $300,000 cars and spend a couple of hundred grand a month on other crap he would only pay $4.42 million in taxes.

And what if that billionaire wants to buy a company? Does he get charged taxes on the sale? If not you have all sorts of new “rich only” loopholes, if he does you have killed business investment.

As for your “underground” economy, a flat tax would drive MORE of the economy underground. More barter, more paying people under the table. And how do you even collect it all? If you pay a kid to mow the lawn, does he collect sales tax? How does he remit it? How do you catch him if he doesn’t? Taxes become easier to avoid and cheat on, not less. You increase the underground economy.

And I still don’t, at all, buy the 23% claimed rate because you only get there by failing 3rd grade math, as detailed above.

The only good outcome would be the reduction in complexity and removal of the IRS. But that really should be possible anyway by simplification and automation of the tax code. A complete change from a progressive to a regressive tax structure is not required for that goal.

[Gaspar]

LOL Yes you are correct you can get there with 3rd grade math.  That's the beauty of it.  Nothing idiotic like our current system.

As the FairTax gains more national attention, questions have again arisen about whether the FairTax rate is 23 percent or 30 percent. In the toxic environment that often accompanies public policy debates, FairTax.org has even been accused by some of misleading the public, even though full descriptions of "tax-inclusive" and "tax-exclusive" calculations abound on our Web site. We hope the following explanation puts all such questions to rest -- at last.

Let’s use an example to illustrate the difference between tax-inclusive and tax-exclusive tax rates.

Assume there is a worker named Joe who earns $125 and spends all of his earnings. Let’s further assume that the government requires him to pay $25 in taxes.


Let’s use an example to illustrate the difference between tax-inclusive and tax-exclusive tax rates.

If the government put a tax on Joe’s income, he would earn $125 before tax and would have $100 after tax to spend at the General Store. Thus, Joe has to earn $125 to have $100 to spend. Joe would also have to file an income tax return.

If the government put a tax on what Joe spends, he would earn $125 and would have $125 to spend at the store. Of the $125 paid by Joe to the storekeeper, $100 would be for the goods he bought at the store and $25 would be taxes that the storekeeper would send to the government. Joe would not have to file a tax return, as the storekeeper sends the tax in to the government.

Either way, Joe pays $25 in taxes and the government gets $25 in taxes. With a tax on income, Joe pays the $25 directly to the government, and with the tax on spending (sales tax), he pays the $25 in taxes indirectly when he buys something from the General Store. The General Store sends the tax that Joe paid to the government.

You also feel that evasion and underground spending will be rampant.  More than 80% of all tax returns are eliminated under the FairTax--every individual filing. What remains are retail outlets collecting the FairTax. Of these, 80 percent of all retail sales now occur at large retail chains like Wal-Mart. The point is oversight will still reside under the Treasury Department but the government's responsibility will be over a far smaller "universe" of tax collection points making compliance oversight far less costly and far more effective than the current system which costs $265 billion a year in compliance costs and still comes up $350 billion a year short of what is owed.

But this debate has already happened.  I understand that the relative simplicity of the system is far to threatening to many people, usually people with a stake in the current system, so I will end this debate here. 

You are correct, the current system is far superior.  We should stick with it.

[Wrinkle]

I'd far more favor an across the board 1% to 1 1/2% CUT in State Sales Tax, to 3% from the current 4.5%. The State's taking way too much as it is on everything.

That would also free that amount up for local jurisdictions to potentially use for local benefit, should the people vote to do so.

Every time I realize the State gets 4.5% ( 1.5 x Tulsa's take) on everything sold, I shake my head and wonder how it is that happened.

[Wrinkle]

You know the 'Fair' Tax started out at 14%, rose to 17% directly, then suddenly became 23% in recent discussions. Did I hear 30%?!