Sales Tax on Services

Overheal

Why don't we do this?

The Tertiary sector of the economy has grown Massive in the last 30 odd years. Applying basic sales tax to the sale of Services (as well as goods) would realize Trillions of Dollars in a few years. And Goodbye Debt.

Am I wrong?

amacachi

You don't have sales tax on services? Nice.

I don't think it would it would wipe out the debt, and could do some harm to the sector. I do find it incredible it doesn't already exist.

Victor

Services tend to be more employment intensive and a sales tax might harm the sector.

Here, VAT on professional services is 21%, but on restaurants, hotels, etc. is only 13.5% as they are considered more employment intensive.

lonestargirl

Sales taxes are on a state by state basis though. There is sales tax on many services here in TX (link), although at 6.25% it's not as painful as VAT.

Victor

Oh, to remove the deficit, one would need to increase the overall tax burden, this may have a negative effect on the recovery.

However, broadening any tax base tends towards removing any distortions that exist, e.g. some countries don't charge a capital gains tax, thereby encouraging wheeler-dealer types over workers. There are certain sectors where there is a blur between product and service, e.g. buying a computer game in a shop v subscribing to a gaming service on the internet.

We don't have a property tax, which led to excessive property prices.

Question, in the USA are businesses allowed write of their sales tax payments against sales tax payments, like we can with VAT?

Overheal

if youre asking what i think youre asking, businesses arent typically charged sales tax on items they are going to use for resale.

silverharp

Victor wrote: »

We don't have a property tax, which led to excessive property prices.

probably overstated the case there a bit.

Victor wrote: »

Question, in the USA are businesses allowed write of their sales tax payments against sales tax payments, like we can with VAT?

as far as I remember in the US you only pay if you are the consumer of the good or service, so in effect you dont net purchases off against sales. If a company consumes the service, the tax is a cost to the business.

Victor

silverharp wrote: »

probably overstated the case there a bit.

I disagree. If everyone had to pay €1,000 per year for their property, they would have a lower repayment ability and be less likely to hold vacant property.

silverharp

Victor wrote: »

I disagree. If everyone had to pay €1,000 per year for their property, they would have a lower repayment ability and be less likely to hold vacant property.

Florida has property taxes and had a pretty wild bubble. I'd say that while it could have had a marginal effect, I think it would have been lost in the noise of all the capital/rental gains people thought they were going to enjoy.