Subject: proposal for federal taxation Comment: I propose a national sales or consumption tax to completely replace all federal income taxes. At the same time, the 16th amendment to the constitution allowing income taxes must be abolished; no double-dipping by the politicians allowed under any circumstances! The following are my suggestions in the format requested from your web page. A. DESCRIPTION OF TAX 1. Tax Base - national sales or consumption tax; I don't know enough about the differences between the 2 to suggest one over the other. I suggest using HR25 (authored by Rep. Jon Linder, R-GA) as a starting point, with certain changes that I will describe below. This has the added benefit of already being in the legislative pipeline, and there is a national advocacy group (Fairtax.org) already in place. 2. Exemptions/Credits/etc. - I suggest that food, housing, and health care be exempted from taxation. These are the basic necessities of life and shouldn't be taxed anyway. Giving to charity, if taxed at all, can be taxed at a lower rate than other sectors of the economy. An alternative has been proposed in HR3759 (authored by Rep. Chaka Fattah, D-PA); there the first $500 of any purchase would be exempt from federal taxation. 3. Tax Rate - I have seen figures of 23%, but I think the applied rate could (and should) be lower. I am libertarian, and I think the federal governement is WAY too big. Also, I would like to see Social Security, Medicare, and Medicaid "off the books" the way they should have been from their inception, but that may be too complicated. I would prefer not to have graduated rates (low rates for basic goods; higher rates for luxury goods) as a supposed aid to the poor; I believe the structure of a sales tax with the exemptions I indicated above would allow a poor family to pay no or very little federal tax IF THEY CHOSE TO DO SO. 4. Distribution - One rate for all and all for one rate! If a poor family chooses to have few "frills", they can pay no or virtually no federal tax. I believe that now, close to 50% of all taxpayers have no federal tax liability. I do't like that; everyone should pay something. An additional benefit that I haven't seen mentioned anywhere is that with a national sales tax, foreign visitors would pay some tax, as they should since they benefit from being in this country. 5. Charity - As I mentioned above, charity can be taxed at a lower rate than other sectors of the economy, or not taxed at all. But be careful: who defines what is or is not a "charity"????? 6. Home Ownership - from above, housing costs would be completely exempted from taxation, as they should be. 7. Collection Method - HR25 proposed that the states augment their current sales tax collection systems to accomodate a federal tax layer. Thsi should be relatively easy, since the infrastructure is already in place. Those states that have no sales tax can contract with a neighboring state that does to do the collection for them. However, I STRONGLY OPPOSE the provisions in Chapter 3 of HR25, in which a new federal bureaucracy would be created: the Sales Tax Administering Authority (STAA). The STAA would replace the IRS, but little if anything else would change. There would still be an army of unnecessary federal bureaucrats, expensive and time consuming paperwork required of the American People, and the STAA, by requiring that people REGISTER to get a tax "rebate" would by its very nature violate the privacy and civil rights of the American people. That's why if HR25 is adopted as a starting point, simply eliminate Chapter 3 entirely and go with the exemptions I mentioned above. 8. Effect on business - Businesses would be exempt from all federal taxation. This would reduce their costs dramatically, with the result being lower prices to consumers (to more than offset the new national sales tax consumers would be paying). Productivity and job creation would increase as well. B. COMPARISONS 1. Simplicity - A one rate sales tax, with known exemptions, would be far simpler than any income tax, and without the complications of any tax system that requires that people identify themselves. A smaller federal tax bureaucracy, no paperwork at all, and no collection of information on the citizenry - all highly desirable benefits. 2. Fairness - This depends on one's definition of "fair". Right now, the federal income tax is anything but fair, where 50% of the taxpayers have no tax liability, and where there are thousands of tax breaks and such. Get rid of all that baggage! With a sales tax, there is still a degree of progressivity, since the wealthy by definition will spend more (and thus pay more tax) than the poor. 3. Economic Growth - As mentioned above, businesses would pay no tax, so the economy would grow faster than now. And without all the paperwork, lobbyists, and tax lawyers gumming up the works! 4. Compliance/Admin Costs - A national sales tax (minus the provisions of HR25 Chapter 3) would have very small incremental administrative cost, since much of the infrastructure is already in place at the state level as mentioned above. C. TRANSITION I don't know enough to comment on how to get from an income tax to a sales tax. But as I mentioned above, there is already some legislative work done with HR25, and an advocacy group in place. As long as the authoritarian and expensive provisions of HR25 Chapter 3 are eliminated. |