Subject: Problems with a National Sales Tax Comment: The so-called "Fair Tax" is not a fair tax at all. It is a regressive tax, in other words, an "unfair tax." Enacting and implementing a national sales tax would most likely send this country into a depression and I will explain why: First of all, to equal the revenue brought in by the current tax system, the national tax rate would have to be above 40%, on top of a state's sales tax rate. Unreported sales and tax evasion will increase significantly due to sellers making more"under the table" transactions, which give the buyers a big incentive to purchase from them. People may think that this cannot happen, but it is happening now, and would happen in a much greater way if a national sales tax is implemented. So, in order to keep the government's revenue up, they will have to keep raising the rate to counter the increase in tax evasion and/or they will have to create an enforcement agency who will set strict (much stricter than the IRS), complex, and more imtidating guidelines and laws to counter the tax evasion. This will deter people from wanting to run their own businesses due to the huge burden of not only collecting state sales tax and payroll taxes, but also all federal government taxes. People will also be scared to run a business due to the highly imtidating enforcement agency that would have to be put in place to stop massive tax evasion. When less people have businesses or when less people don't try to start businesses, that creates more people looking for jobs, which will increase umemployment. Second, a national sales tax will have a dramatic impact on the way people spend money. Buying a $500 product would leave consumers with a $200 or more tax bill, right then and there. Buying a $1000 product, could have a $400 or more tax bill the moment that product zaps through the scanner. Realisticly, most people do not like paying taxes, but they know they have to. But if a person could avoid taxes, most likely that person would find a way to do so. Under a national sales tax, a person could avoid taxes by not spending money and saving. This sounds like a good idea for the individual, but when a majority of the people, in a instance, decide that avoiding taxes is a good thing, that means less spending which equals less money for the government and less money for businesses across the United States. A major decrease in spending will cause the economy to decline. If a business's revenue starts to slowly, permanently decrease, that means they will either start to manufacture less products or buy less products from suppliers. If that happens, less machinery and people are needed due to the lessening demand on the product. This will cause a dramatic rise in umemployment, and since many projects will be cut, and that means the demand to borrow money to finance those projects will decrease, sending the interest rates up. While the stock market may get an initial boom the new found money that the average American has saved, the constant decrease in revenues and earnings in businesses across the US will cause the market to tank. Professionals will dump their shares first, leaving the average, untrained American investor with major, debilitating losses. All of this coupled with a decrease in government spending due to less revenue coming from people not spending and/or massive tax evasion, will simply destroy the economy and send this country into a deep depression. The best idea to this tax code problem is to reform the current code, and not to drastically change the way this country has been operating for decades, because that will only lead to disaster. |