The Proposed National Sales Tax: An Introduction and Argument Death and Taxes. Americans accept both of these as inevitabilities. Every year, the people of this nation are joined together on April 15 th, the deadline for the filing of income tax. Of course no one likes it and of course people get frustrated, but do we really need to accept it? Money is taken directly from our paychecks before we even see them, and now we fork over more.
Eventually, we forget where it's all going. Everything we go through; the confusion, the unanswerable questions, and the anger are done on purpose. The income tax code is made to throw us of so that we will eventually pay up the loot so that the ordeal ends until next year. Out of all this confusion came the creation of the Americans for Fair Taxation, the AFT.
The AFT is the group behind the biggest proposed change in our nations tax history, the National Sales tax. America and it's citizens would greatly benefit from the adoption of the National Income tax and the abolishment of the costly, confusing, and ultimately ineffective Income tax program. The National Sales tax is a plan to simplify the government's tax collection process. In short, the Federal income and payroll taxes would be eliminated and replaced with a 23% sales tax on all purchases of goods and services with no exceptions (Gleckman 44). No forms, no mailing, no receipts; just a system of pay as you go. This Federal tax would coincide with any state sales tax.
For example, Nebraska's 7% sales tax would combine with the National Sales tax to a total of 30%. This plan creates a system where people are taxed for what they choose to buy, not on income they generate. The people of this country will be put in control of the about of taxes they pay based on the lifestyle choices they make. This is the most control ever possible to the taxpayers of this country, and at the same time creating a better economic climate. The National Sales tax will expand the economy and bring new opportunities to Americans. David Burton of USA today reports that "Virtually every study predicts a much healthier economy if the current tax system is replace with a National Sales Tax (18)." He continues to say that the economy will grow 10-14% within 10 years, and an economy that strong means that there will be more jobs with better pay and continuing opportunities for advancement in the workplace.
More people working will benefit the Federal, state and local governments as well. The more workers with more pay means more money will be spent, thus being driven back into the government. It's kinda starting to make sense, huh? There is so much more that the National Sales tax will accomplish as well. People who choose to save or invest their money will be freed from a system that "rewards the here and now, penalizing taxpayers who seek to save for the future (Burton 18)." The 10% interest you get from your bank will be all yours.
Also, there could be a surge in savings, causing banks to compete with each other. The competition would raise the percentage of savings, and that means more money for you. Also, there would be no need to tell the government what you have saved away for that proverbial rainy day. You don't have to pay taxes on the money you get from the bank, it's all yours. Besides, I don't like the idea of a bank getting money from the government to give me so I can turn around and have the government ask for it back.
Probably the most efficient change in this new tax system is the way it handles taxes of necessities. Currently there is no state taxes on food, but that would change with the National Income Tax program. While it sounds unfair on the surface, the ATF has included a plan that will issue "a monthly (flat rate) rebate for all families, regardless of income, to offset taxes on basic necessities (Gleckman 44)." Howard Gleckman of Business Week magazine gives an example of a monthly check for $308 for a family of four (44). While this may sound like the first bureaucratic loophole in the tax plan, in has an excellent reason for being there. One of the main advantages to the plan, as mentioned before, is that it taxes lifestyle, not income. So, if foods were to remain an exception to the law then Ramen Noodles would have the same tax as lobster, which is nothing.
The National Sales tax leaves the consumer to choose wether the a ditional tax on the high-priced foods is worth the meal. Whatever you choose, you would still receive a rebate for the taxes, but your choice comes to wether or not you want your rebate to cover all or just some of your purchases. For many, they will choose to pay extra. However, most will budget their spending so the rebate and tax work in their favor. Also, exemptions in any form would allow lobbyist groups would work for any industry looking to exempt themselves, no matter what the product (Burton 19). This would leave a hole for corruption and bad judgment to prevail.
With everything that the National Sales tax would do for Americans, there is another major reason that a change is necessary. The final, but most important reason for the National Sales tax comes from the inefficiency of the current income tax system. In 1998 the non-partisan Tax Foundation reported that Americans annually spend $225, 000, 000, 000 (that's billions) to file taxes (Burton 19). David Burton breaks it down to "$850 for each man, woman, and child in the U.
S. that is spent on tax-related paper work (19)." This is obviously money that could be better spent. Families could provide clothes, home renovations, or vacations. Businesses could put the money back into the pockets of their employees. The money saved to Americans should be reason enough to stand behind any change to the system. With a National Sales tax there would be nothing to file so there would be nothing to buy.
Can you imagine not filing taxes? How about those who already don't bother to file taxes? Tax evasion is a continuous problem with our current Income Tax program. Every year people are investigated and fines are levied by the Internal Revenue Service (IRS) to those who refuse to pay some or any income tax. USA Today reported that in 1995 the IRS issued more than 34, 000, 000 civil penalties to taxpayers in America in an "effort to force compliance with the tax system (Burton 19)." About 2/3 of that number was for income tax, the rest was for payroll tax, both of which would be eliminated by the National Sales tax (Burton 19). If these number weren't enough already, the IRS also says that tax evasion had increased 67% from 1987 to 1998 (Burton 19). This figure does not include the evasion of criminal money like drug or black market sales. If people don't want to file their taxes, it's easy to collect money when they buy clothes, furniture, or anything else taxed.
Collecting taxes once a year can make it easier for a personal to forget to pay for choose no to pay their dues to the government. However, when everyday is a sort of "Tax Day," and everyplace is responsible for helping the government, everyone will pay their taxes. Congress knows that the American people deserve more from their taxes. Oklahoma Representative Steve Largent agrees, saying "With this bill, we will finally set a date to replace our unfair tax code with a new system that will be both simple and fair to all working Americans (Rigsby 9)." The bill Largent refers to is the Tax Code Replacement Act, which sets the date of July 4, 2004 as the deadline to study and propose serious new tax codes. Charged with developing the new tax code is a 15- member bipartisan commission, containing two representatives and two senators (Rigsby 9). This commission is looking into both the Flat Tax Rate proposal (where every citizen pays a single percentage of income with no deductions) and the National Sales tax plan.
Their job is not to try and push a agenda, they are looking for the best plan to fix the bleeding Income tax program. The government knows that the people want change, and now there is a platform. Ultimately, the National Sales Tax resides on one major point that simpler is better. Better for the government because is provides a system void of the possibility of skimming taxes.
Better for the economy because the plan will generate more jobs, more money and, most importantly, more spending. Finally, it better for us, the taxpayers of the United States. We will have a system that will save money and also allow us to use the money however we wish. Certainly, a change this drastic in the tax program will have its critics. Treasury official Donald Lubick, under President Clinton, spoke out against any change to the tax system. Lubick told state legislators that the National Sales tax would "imperil our fiscal soundness" and have a tax rate of up to 40% to be effective ("Tax Official" A 4).
Lubick's remarks were countered by Texas Representative Billy Tauzin, who stated that the rate is not proposed to reach that high ("Tax Official" A 4). Because the proposed National Sales tax has not been implemented before in a free world economy, both sides of the debate are contesting each other and finding studies that support their claim. However, all this dialog has come to a conclusion that everyone agrees with; No one knows what will happen. The National Sales tax has become a frightening idea to politicians and large businesses not because they know that bad things will happen, but because they don't know what will happen. "Our principle concern," says Jcpenney Vice president Del Thread gill, "is that no one really knows what the full impact of replacing the entire Federal Income tax structure...
will have on our economy (Rankin 13)." This sentiment is echoed by John G. Wilkins, author of a study for the National Retail Federation of the National sales tax. "Trading an income tax in for a national sales tax," reported Wilkins, "is an experiment that could bring serious harm to a flourishing national economy (Rankin 13)." The argument continues and eventually trickles down to opposing studies. The economic growth as stated before or the $180 billion recession proposed by Wilkins (Rankin 13). New jobs coming from increased income or 1.
5 million jobs lost "during the transition (Rankin 13)." With everything shown and on the table, this author must concede to the idea that since it isn't known exactly what will happen, there is no reason to push for immediate change in the United States tax code. However, the idea of the National Sales tax is still worth perusing. It might not become a reality to this generation, but it should be a standing alternative worthy of serious study. No one should want to change the way things are now in the hopes of bettering the country, only to find out that it was an avoidable mistake.
The National Sales tax is an alternative system that has the potential to help America. The criticisms of the Income tax are solid; it is a flawed system. However, the National Sales tax is not the best solution for right now. Like many great ideas were at one time, the tax plan is still in a state of un-applied theory. To institute a National Sales tax and abolish the Federal Income tax now is too much of an uncertainty, but the idea of change should not leave American's minds. Remember the next time you pay your taxes that there is room for change and it is a change that could better everyone.
Works Cited Burton, David R. "Tax Sales, Not Income." USA Today July 1998: 18-19. Gleckman, Howard. "Ready for a 23% Sales Tax?" Business Week 29 Dec. 1997: 44. Rankin, Ken.
"Consumption Tax Debate Has Two Tales." DSN Retailing Today 22 May 2000: 13. Rigsby, Deborah. "House Aims to Eliminate Federal Tax Code." Nation's Cities Weekly 24 Apr. 2000: 9. "Tax Official Blasts Flat Tax and a National Sales Tax." The Wall Street Journal 6 Feb.
1998, eastern ed. : A 4. Works Cited Burton, David R. "Tax Sales, Not Income." USA Today July 1998: 18-19. Gleckman, Howard. "Ready for a 23% Sales Tax?" Business Week 29 Dec.
1997: 44. Rankin, Ken. "Consumption Tax Debate Has Two Tales." DSN Retailing Today 22 May 2000: 13. Rigsby, Deborah. "House Aims to Eliminate Federal Tax Code." Nation's Cities Weekly 24 Apr. 2000: 9.
"Tax Official Blasts Flat Tax and a National Sales Tax." The Wall Street Journal 6 Feb. 1998, eastern ed. : A 4.