To get this plan enacted, a lot of lawyers, cpas, and consultants will have to be ignored. This is the only "fair" way to finance government according to the plan's author. We would appreciate as much feed back as possible on this plan.
REPLACING PROPERTY TAXES WITH SALES TAXES
PROPERTY TAXATION MUST BE REPEALED
CURRENT PLAN
6% sales tax on goods = approximately 6 billion per year
no sales taxes are collected on foodstuffs, prescription medications, or prescription medical devices or supplies, or prescription hearing, vision, or dental devices. This would remain the same under the following dissertation.
I will present two anecdotal experiences on sales taxes applied to services as well as goods. However, I think that these are very realistic presentations of the current economy.
1. If you engage an electronic technician to repair your TV or Stereo or other home electronic devices the total charges might be as follows. QUALIFICATION: I operated an electronic service business for many years and the total charges for the repairs in most cases were as follows: the total repair charge was in most cases broken down to 63% service call and labor –round to 60% - and 37% for parts (goods taxable at 6%) – rounded to 40 %. Now let us apply this to the current income that is generated by taxing goods only and apply the increase of income which would be provided by taxing services as well at the current rate of 6%. The 40% is equal to approximately 6,000,000,000 per year. The proposed 60% would be equal to 9,000,000,000. per year.
Well I guess that would cover the loss of property taxes ( 8.2 billion per year) and then some. And this doesn’t include the tax income from professional services which I do not have income information for but which I suspect would be equal to or greater than the 3-1/4 % income tax.
In my opinion, with the added income from professional services, the overall sales tax could be reduced to 3% or maybe even 2% and still provide the needed revenue to finance our bloated local and state government. And really help the lower income families in our state.
2. Let us try another non-anecdotal service payment from just the last year. The clothes dryer wouldn’t heat, so my son and I checked out the obvious things like the circuit breaker and the heating coils – both ok. So I called a recommended repair service. Their service technician determined that a sensor had failed and an upgrade “kit” was required to solve the problem. This diagnosis proved to be true and the charge for the repair was $125.00 plus $1.80 for sales tax on parts (goods). Now this breaks down to $95.00 for service call and labor and $30.00 for parts (goods). Now let us apply this to the current income generated by goods only @ the current 6% sales tax and apply the gain in tax that would be generated by a sales tax on services at 6%. The services would be approximately 80% and the parts (good) would be 20%.
20% collected would be = to approx. 6,000,000,000
80% collected would be = to approx 24,000,000,000.
I would guess that this kind of revenue would “super finance” state and local government.
Now let us cut the sales tax rate to 3%.
The income on goods would be approx. $3,000,000,000. The income on services given in these two examples would be somewhere between$12,000,000,000 and $9,000,000,000. More than enough to finance state and local government. This doesn’t include the tax income from personal services such as attorney’s fees, CPA fees, and consulting and lobbying fees. I think that the income from these fees would allow the lowering of the sales tax to probably 2% and still fund state and local government before we reorganize it and cut out the “pork”, “fluff”, “patronage”, and payoffs.
I also think that we should apply a “pilot” (payment in lieu of tax) to businesses and non-profits and churches which would be much less than the current property and inventory taxes. Again, PRESCRIPTION MEDICINE, FOODSTUFFS, MEDICAL SUPPLIES, MEDICAL TESTS, HEARING, DENTAL AND PSYCHOLOGICAL SERVICES should be exempted from sales taxes.
This formula would be a boon to lower income earners and senior citizens and a huge attraction for groups wishing to attract new business to Indiana. Just think - More businesses, more employees, and more tax payers. The state would flourish and be a leader in innovation for all other states. And all this before we reduce the bloat in government.
Maurice H. Gunyon
Indianapolis
From Hoosiers for Fair Taxation
Wednesday, February 27, 2008