Subject: Consumption taxes vs income taxes Comment: I strongly urge you to give serious consideration to the replacement of the current income tax system (including a recommendation to repeal the 16th Amendment) with a consumption-based tax. Either a retail sales tax (cf. the "Fair Tax" proposal HR 25) or a value added tax would be superior to the current system. Objections that such a tax scheme is regressive could be overcome in a number of ways: rebates to individuals corresponding to estimated taxes for a family at the poverty level (or even 150% of the poverty level). Alternatively, exclusion of rents up to some level, and of real-estate purchases upto some fraction or multiple of the median price for a single family home; exclusion of the purchase price of one vehicle every three years up to say 25% of the median fleet price for new sedans; exclusion of some food items; exclusion of education expenses up to some level per year; etc. A VAT scheme would give more flexibility in excluding items to avoid regressivity, for instance, food production and minimal processing could be excluded, while processing into pre-packaged foods could be taxed. A consumption tax would encourage savings since credit purchases would incur taxes, while income used for debt repayment (a form of savings) would not be taxed as it is under the current system. Administration of the tax would be simpler (even a VAT would be no worse to administer than a corporate income tax, and a retail sales tax would be infinitely simpler than the current system), and would create not friction between citizens and the government as the current system does. Ordinary citizens would be freed from the need for tax record keeping and the paperwork burden on businesses would be less than what they now experience. |