If we randomly assembled 10,000 economists we would have 10,000 different economic theories. Economic theory looks great in an academic setting, but in real practice it rarely matches the academic predictions. When gas prices go through their periodic spikes in prices we are told that it is a supply issue, but when demand later drops the prices fall much more slowly than they rose and they never drop to anywhere close to what they had been. Retailers and manufacturers are in business for one thing, to make as much money as they can and pass those profits on to their stock and bond holders, not the consumer.
However, this argument has been beat to death already and I want to interject a different argument into this debate. My new argument is that demand for durable goods will drop through the floor if a new, massive, national sales tax is implemented.
Currently 47% of American households do not pay federal income taxes. That means that 47% of US households would have a large income tax increase under 9-9-9. To offset this onerous and draconian increase there would be an enormous shift in consumer spending away from new goods, which are subject to a national sales tax, and to used goods, which are supposedly going to be exempt from the national sales tax.
Additionally, 9-9-9 provides no means to police or enforce collections of the new sales tax. Will we double the IRS so that there will be enough agents to audit and enforce the collection of these taxes from retailers? And there will be a huge rise in grey market sales where distributors who are on the verge of bankruptcy will try to move excess inventory to try to stave off insolvency.
There is a further problem here, used goods won't last forever. When half of the country turn away from new goods to used goods, and thereby drive manufacturers out of business, where will they turn a few years later when their used goods finally expire? Who will be producing the new goods that need to infused into the economy?
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