PeterZ wrote:I lost the work I was doing on this response. Bother!
Long and the short of it is that with a world equities market totaling between 80tr-100tr in market cap and the amounts being traded annually approximates between 75%-150% of world GWP and approximately 35% of those equities reside in the US, charging 5% of the purchase price per transaction will net a good deal of tax revenue.
If we assume for this discussion that the US will $34 trillion traded in the year, that's 3.4 trillion in transaction tax. 5% paid by the buyer and 5% paid by the seller. Further assume that new issuances represent 10% and the same transaction tax is applied. This generates another $.17tr
US Bond market is approximately $40tr (as of 2014) and growing. Weighted average maturity is 5.6 years implying that $7tr mature every year. Further assume than 10% are traded annually. Applying a 5% transaction cost to that traded $4tr amounts to $400bn, again 5% to buyers and 5% to sellers. Applying that 5% to the new issuances generates $350bn.
Total retail sales is 5.2tr in 2014 and grew 28% in the last 5 years, but let's keep this number for this discussion.
Now in 2014 total income tax, payroll tax and sales tax revenue for Federal, States and localities. was $5.1tr out of a total tax revenues of $6.1tr. If we set the total sales tax at 20% for all jurisdictions, we get sales tax revenues of $1tr.
Back of the napkin math suggests that $1tr for sales tax, $5.1tr for equities transactions and $750bn for bonds transactions generates $5.32tr total tax revenues. That compares to the total $5.1tr generated by the income tax and sales tax for all levels of government.
As you can see there is wiggle room on the rates assessed.
Let's note some other things I see first...
These back of the envelope numbers are assuming:
1. NO exemptions for anyone. Which I think we've agreed would be required if you didn't want to drive all the poor towards ever increasing poverty.
2. No tax avoidance behavior.
3. No tax evasion.
Etc...
But if you apply the exemption a huge chunk of that revenue disappears. And to make it up you need to raise the rate on everyone else.
Then people and corporations immediately go to work finding every way they can to avoid the tax. Which takes another chunk out of the revenue. Which means you need an even higher rate.
And then there's just plain evasion. Once the rate has been bumped to factor in the need to make up the revenue from the exemption and the avoidance impacts it's getting a lot higher. Don't tell me you don't think there wouldn't be a sudden outbreak of ever increasing numbers of cash transactions occurring off the books all over the country. And now you're short on revenue again and up the rate goes...
The guiding principle is both morally superior and practically more consistent with the services government provides than an income tax.
I still don't even have a vague grasp on where you are getting any moral superiority angle from.
Taxes are assessed when someone engages in a voluntary action and the government gets paid for securing those transactions.
Last I checked the workforce of the US was not slave labor. Participating in the workforce is also a voluntary action. (And before you say "but people need to earn a living", what is entailed by earning a living is making an income that *you can spend*. If you have no need to buy anything you have no need to earn income. So it doesn't matter if we're talking income taxes or sales taxes for that.)
And the government gets paid for creating and maintaining the entire societal infrastructure which supports all the businesses that generate all those jobs by getting their cut.
So I still have no idea how any moral superiority argument can be made here.
(Parting note... generally when people talk sales tax proposals they are not talking about applying those to stock or bond transactions. So much as proposing even fractional percent taxes on such transactions has sent Wall St into fits of rage in the past. That you are casually throwing around numbers like 10% for those transactions here is fascinating, the full on Wall St riot at such a proposal would be amazing entertainment to watch.)