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Wednesday, May 27, 2009

National sales tax? Yes. In addition to income tax? SCREW THAT!

At long last, some in Washington are saying that it's time to have a national sales tax, which is something that I've been advocating for years.

The problem is that these same people want the sales tax in addition to the pre-existing income tax.

Common around the world, including in Europe, such a tax -- called a value-added tax, or VAT -- has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need to avert fiscal calamity.

At a White House conference earlier this year on the government's budget problems, a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT. A recent flurry of books and papers on the subject is attracting genuine, if furtive, interest in Congress. And last month, after wrestling with the White House over the massive deficits projected under Obama's policies, the chairman of the Senate Budget Committee declared that a VAT should be part of the debate.

"There is a growing awareness of the need for fundamental tax reform," Sen. Kent Conrad (D-N.D.) said in an interview. "I think a VAT and a high-end income tax have got to be on the table."

This is fiscal insanity without any clarity of vision.

Here's what should be done: scrap the income tax completely. Doing so would boost the economy in ways that hardly anybody can possibly imagine. It would free up a massive portion of the individual and small business sectors to re-engage in private enterprise. Then have a national sales tax, which is equitable across the board and with no regard to "income brackets". And for good measure, slash corporate tax rates so that more American businesses will be enticed to bring their industries back to the United States.

If those things are done, there will be a domestic financial renaissance the likes of which has not been seen in recent memory.

But to pile new taxes upon those which are already too burdensome for most Americans is to invite inevitable disaster.


Matt said...

Hey Chris, why do you think a sales tax would be a good thing?

No need to explain why we need to get rid of the income tax, however. I am already well informed of that particular topic. :)

Chris Knight said...

It is a fair tax for one thing Matt: a tax equally applied to everyone. You only pay more if you purchase more. It also means that an individual or company would no longer have to devote outlandish amounts of time and money toward calculating and paying an income tax (it would honk off outfits like H&R Block but think about it: we do spent way too much time toward tax preparation!). It would generate plenty enough income for the government but it would also mean that there is no guaranteed amount of revenue for the government either. The President and Congress would finally have to learn what it is to "live within one's means".

There are plenty of other reasons but those are the ones that have most come to my mind over the years.

Anonymous said...

A national sales tax would not be the utopia you think it is.

Much of the incentive for buying houses, getting a higher education, driving more fuel-efficient cars and doing things that those "in-the-know" individuals want to push Americans to do are directly tied to tax-credit based incentives which would be impossible to continue on a sales tax basis.

Also, consider how many transactions that go on now legitimately with a 7% state sales tax would go under-the-counter with an 18% federal sales tax tacked on top of it. That would mean less revenue for the states and the creation of a whole new "accountant police" force to find the sales and enforce the tax law on them.

Traditionally, local governments have been given the authority to tax property, state governments the authority to tax sales and the federal government the authority to tax income. It ought to go back to that, with limits on the entire taxing authority. That, to me, would be the most "fair" way to pay taxes.

Ol' You-Know-Who