11/08/2004

FOXNews.com - Politics - National Sales Tax Promoted as Fairer System

I've know I've brought this up before, but I've been following the national sales tax debate for years (and telling everyone I know about www.fairtax.org). I've long hoped that the idea of a national sales tax would be a part of the national debate. Finally, the idea appears to be gathering some steam. There are currently 2 bills that are presently being debated. The Tax Freedom Act of 2003 and The Tax Freedom Act of 2004 .

For those of you not familiar with the idea of a national sales tax, it works like this:

1) There isn't an income tax .
2) No more income tax withholding.
3) A (proposed) 23% sales tax.

Additional proposals:

1) Everyone is given a "prebate" to be administered by the states at the beginning of the month. The prebate represents the poverty level income per month. In other words, those living at or below poverty level get the tax back.
2) The IRS is either entirely eliminated or drastically reduced.

I do have a few exemptions of my own:

1) A one home purchase up to $250k (would exempt most of the middle class). Everything above that amount would be taxed at the normal rate.
2) A one vehicle purchase up to $25k...again exempting the middle class. Any vehicle purchases above that amount would be taxed at the normal rate.
3) Food would remain exempt.

Benefits:

1) Everyone in the Black Market Economy pays taxes now. Waitresses, Bartenders, Prostitutes, Drug-Dealers, Strippers, etc....they will all pay as it's a consumption tax. This is an important issue because there is a HUGE black market economy.
2) Will encourage savings and investment. Your money is yours until you actually spend it. A side-benefit of this point is that it will also bolster retirement savings. Another side-benefit is that foreign investment will likely increase (no capital gains tax).
3) Fewer attorneys and CPAs needed to help citizens file tax returns. The tax code is approx 36,000 pages. What normal citizen can figure that garbage out?
4) Sales tax infrastructure is already in place for 45 out of 50 states. Instead of sending IRS agents out to beat on taxpayers, the IRS will only need to focus on enforcement of businesses collecting the taxes and people attempting to fraudulently collect the prebates. Penalties for failing to collect the sales tax or attempting to fraudulently collect the prebate should be VERY strict.
5) Shrinks a government agency...always a plus! Especially when the agency is the IRS.

Radical? Certainly....but it's also a great idea. Think about it...class warfare will be irrelevant. People who make more, spend more, and pay the most in taxes. People that get paid for goods and services in the Black Market Economy will now pay taxes on their purchases.

5 Comments:

Blogger Erik said...

The pre-bate thing is a neat idea. It works to offset the regressive nature of the sales tax.

It's getting a serious look, but I doubt anything will come of it. You say that there will be less need for lawyers and CPAs, which is the exact same reason that the bill will have a hard time getting through. Look how many lawyers there are in Congress. Lawyers and CPAs are constituents of our congressmen. Less need for them means jobs lost.

Don't get me wrong. I like the idea, I just don't see it happening.

November 9, 2004 at 8:55 AM  
Blogger Liberal_Slayer said...

Probably not this time around. But the fact that it's been introduced is a step in the right direction.

I think as the public becomes more aware of the tax, it will gain in popularity. Politicians are interested in being re-elected. If the electorate is clamoring for a national sales tax, they'll have to listen. Unfortunately, not enough of the public even know these 2 bills were introduced.

November 9, 2004 at 12:12 PM  
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