Reply #11: Adding those extra items can make a big difference in WHO is taxed. [View All]

[eallen]

The rich as well as the poor engage in economic transactions. Right now, many of those transactions go completely untaxed, because they are not retail sales. Expanding the tax base also has a large effect on the rate. A 2% to 3% transaction tax should be adequate to replace the income tax. Real estate, stocks, and other financial instruments may not be a large list of categories, but they are large dollar transactions compared to clothing, food, electronics, hardware, etc.

'Tis true that a transaction tax encourages vertical integration, since that obviously eliminates the boundary at which wholesale purchases otherwise would be taxed. The extent of that depends greatly on the rate.