Commerce, Taxes And Cents. - Coin Community Forum

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Author	Replies: 5 / Views: 1,243
allranger Pillar of the Community United States 1391 Posts	Posted 04/04/2012 5:08 pm I asked this question before but it got lost in the sea of comments between the cent haters and lovers. I was wondering how many times a dollar has to change hands before it is "gone" in taxes. For example, if I pay a neighborhood kid to mow my law and give him a $20, he should report it on his taxes. For the sake of argument say 10% is taken. So: $20.00 $2.00 in taxes. So he goes and buys a CD for $20.00. Lets say another 10% is taken out for taxes on the stores side. $20.00 $4.00 And so on. I know this is a very simplified example. The only research I have been able to find is some what old but it states that it is estimated that a "new" dollar in the economy exchanges hands 8-10 times before the government takes it in taxes. Of course it doesn't break which branch of government gets what and it is more of a though experiment. But here is where I am going with it. How many times does a cent have to exchange hands before it has earned the government more than a cent in taxes? If it still is 10 times a typical cent probably produces several times its face value and cost to manufacture each year. Any way, I had not seen anybody approach it from that angle and was wondering if anybody had any data. Report this Post to the Staff

jbuck Moderator United States 187940 Posts	Posted 04/04/2012 5:18 pm The problem with the cent is that it is usually only exchanged once before it is lost to the change jar or trash can. This is the problem, and why they have to mint so many every year. So, for the sake of argument, even if the cent could somehow "break even" and/or become "profitable" for the government on the second transaction, the vast majority of the cents being made will never reach that threshold. Coin Collector Since 1978 Avatar Old Avatar 7070 Eisenhower Australia Canada World CCF Members on eBay CCF eBay Search Engine Report this Post to the Staff
Conder101 Bedrock of the Community United States 17884 Posts	Posted 04/04/2012 10:51 pm Your initial example is flawed. The first time the $20 changes hands there is $2 in tax but in the second transaction only $18 is from the inital transaction so only $1.80 Of the tax is from the intial $20,, In the third transactine the tax from the inital twenty would be $1.62 and so on. To consume the entire initial $20 takes 73 transactions. Report this Post to the Staff
ZiggyZ Valued Member United States 162 Posts	Posted 04/04/2012 10:54 pm Without rounding money will never be completely taxed, unless at some point there is a 100% tax. Your example is flawed because after the first transaction there is only $18.00 dollars remaining, not $20.00. So when the money is spent the second time, the tax is $1.80, and you are left with $16.20. You can take 10% off something a trillion times and never end up with zero. So, the only way to figure out the first question is by picking a digit to round at (probably 1/100th, since that is the smallest unit in circulation), and that doesn't really work for the penny example, because the first time you spend it you're already below the rounding threshold. Report this Post to the Staff
just carl Bedrock of the Community United States 20753 Posts	Posted 04/05/2012 08:00 am The main problem with this attempt to figure out where all the money goes is everywhere taxes are different. For example in some areas there is a City sales tax, a County Sales Tax and then a State Sales Tax. Next problem is the Income Tax which differs due to marital status, buisness type, the Weather, shoe size, Mother's Maiden name and many other items including a neighbor that reports what your doing to the IRS. So if you started with $20, deduct the price of gasoline for your car to go somewhere to spend it, when you get there, you'ld be in the Minus already. Simple solution is use a Credit card but then what you just spent is now being hit with about 20% or more banking charges. Next you go ot a Loan Shark to borrow enough to pay off the credit card and find you now can not pay him back. So he has someone rub you out and no more problems with where the $20 went. Report this Post to the Staff
BuffaloNuts Valued Member United States 57 Posts	Posted 04/05/2012 2:53 pm This same concept is how the fed can stimulate or reduce the economy. By changing the amount of cash that banks must have on hand compared to the amount they loan, they can change the amount of 'money' in circulation and therefor also taxed... There is a bit more to it then that but there it is in a nutshell... Report this Post to the Staff
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