|
Getting your Trinity Audio player ready...
|
Funding government with a Unified Consumption Tax
by Gregory Thayer
Vermont is known for its progressive policies and innovative ideas, but the state faces a significant challenge: funding its $8.6 billion state budget efficiently and equitably. The current tax structure—comprising of income, property, payroll, and other various other taxes—creates administrative headaches, inefficiencies, and a heavy burden on residents and businesses.
What if there were a simpler, more transparent solution? Imagine a Vermont where all taxes are repealed and replaced with a single, unified consumption tax. This bold proposal, a gross sales tax on raw materials, wholesale and retail sales, and service industries like legal, accounting, advertising, and medical services, could be the key to revolutionizing how Vermont funds its government.
The problem with the current system. Vermont’s current tax system is complex and unwieldy. Property taxes disproportionately impact homeowners, income taxes discourage earnings and investment, and payroll taxes burden both employers and employees. This patchwork approach creates inefficiencies, increases administrative costs, and leaves room for inequities across different sectors.
Businesses, especially small ones, face a significant compliance burden. Taxpayers, on the other hand, often feel the pinch of overlapping taxes that eat into their earnings and savings. The time is ripe for a change—a streamlined system that eliminates these inefficiencies while maintaining the necessary revenue to support the state’s needs.
This is a one-tax solution that simplifies taxes and people’s lives, The proposed consumption tax plan offers a straightforward alternative: replace all current taxes with a single gross sales tax applied across the board. Imagine not having to pay property taxes any longer and the government not withholding money from your hard-earned wages on payday.
Here’s how it works: every transaction involving raw materials, wholesale and retail goods, and services would be taxed at the point of sale. This includes industries such as architecture, legal and accounting services, advertising, and medical care. By taxing consumption rather than income or property, Vermont would shift to a system that is simpler, more transparent, and easier to administer. No more complicated annual tax returns and codes of what is taxable, exempt, or allowable.
There are four key benefits to the unified consumption tax plan.
- Simplicity:
Replacing multiple taxes with one gross sales tax dramatically simplifies the system. Residents and businesses would no longer need to navigate complex property tax codes, payroll tax filings, or income tax brackets. - Fairness and Transparency:
Everyone contributes based on their consumption. This means those who spend more pay more, while those who spend less—often lower-income individuals—are taxed less. With a single rate, there’s no confusion about what is owed or where the money goes.
- Economic Growth. A single tax reduces business administrative costs, making Vermont a more attractive destination for entrepreneurs and companies. Lower compliance burdens free up resources for growth and investment.
- Flexibility. Essential goods and services, such as groceries and prescription medications, could be exempted or taxed at a reduced rate to address concerns about being a regressive tax.
Implementation and the challenges. This will not be easy, but it’s the best, fairest tax plan available to everyday working Vermonter. Transitioning to a unified consumption tax is a bold move, and it won’t be without challenges. Repealing current tax statutes will require careful legislative action and public buy-in. There may also be concerns about the regressive nature of consumption taxes, as lower-income households spend a higher percentage of their income on taxable goods and services.
However, these challenges can be mitigated with targeted exemptions and credits. For example, Vermont could exempt essential items like food and medicine or provide rebates to lower-income families to offset their tax burden. Public education will also be critical to ensuring that residents understand the benefits of this system.
Yes, this is a bold step forward, Vermont. Adopting a unified consumption tax would position Vermont as a leader in tax reform. If successful, this model could serve as an example for other states facing similar challenges. By embracing simplicity and transparency, Vermont could pave the way for a more equitable and efficient way to fund government operations.
This isn’t just a tax plan; it’s a vision for the future, a Vermont where residents and businesses will thrive under a fair, clear, and effective system.
The time has come to think boldly. A unified consumption tax offers a chance to break free from the complexities of the past and create a system that works for everyone. Are Vermonters ready to lead the way?
Greg Thayer is a Rutland resident and former candidate for lieutenant governor.
Discover more from Vermont Daily Chronicle
Subscribe to get the latest posts sent to your email.
Categories: Commentary, Taxes
How does this pay my local government road crews wages????? Will cash be allowed for payment????? Many questions have to be answered.
This would kill off what remains of retail in particular along the Eastern side of the state, as everyone would do even more of their shopping in SALES TAX FREE New Hampshire.
The consumption tax can be tied to the lawful address of the payer. So in order to circumnavigate elsewhere, payments have to be in cash. And, as long as the tax exempts food, clothing and medicine, then many if not most of the items can be purchased used, eliminating the tax
????????????? and more ???????????? My biggest question, how will it affect those, under the Golden Dome, as they and their agenda are what will decide .
A tax system like this proposal encourages two things, being a do-it-yourselfer and otherwise paying people who do services for you cash under the table. Mowing your own lawn, clearing your own driveway and cutting your own firewood are examples of how you could avoid the tax legally. Would paying a plumber, excavator or trash hauler in cash be seen as illegal tax evasion? Never liked the property tax for big-ticket budget items like education, as it punishes those who engage in “the American Dream” of home ownership, which like marriage, is a stabilizing force in society. Property tax, proportional to value only makes some sense in paying for town services. The ownership of property has little bearing on one’s burden on the school system.
I recall hearing a discussion long ago that said property tax and income taxes were the most stable kinds of taxes and that is needed for community governance and needs, but I am open to revisit that thinking and see what else was said. I do agree that having stability is important – too many community decisions need to be made that require it.
From Investopia that uses the same picture to describe consumption tax – https://www.investopedia.com/terms/c/consumption-tax.asp
Consumption Tax vs. Income Tax
Whereas a consumption tax is levied when people spend money, an income tax is levied when people earn money, or when they receive interest, dividends, or capital gains from their investments.
Supporters of consumption taxes say they encourage saving and investment and make the economy more efficient. In contrast, they say, income taxes penalize savers and reward spenders. So, they argue, it’s more fair to tax people on what they take via their consumption, rather than what they make via their income.
Opponents say that consumption taxes regressive taxes: they unfairly and adversely impact lower-income people who must spend a greater percentage of their income compared to higher-income people.
I’m not eager to see regressive taxation on Vermont’s growing lower-income brackets.
We don’t have an income problem, we have a spending problem.