Subject: Preference for National Sales Tax Comment: Tax Reform --- Why we need a National Sales Tax The federal income tax and the Social Security/Medicare taxes are onerous because they tax work, while giving preferred treatment to other activities that do not require work. Work is what made our country great, and it should not be penalized by our tax system. The most effective way to raise money for national expenditures is through a national sales tax. There are two primary reasons I would like to offer to support that claim: 1) A national sales tax would apply to all goods and services so, from a tax perspective, it would be a level playing field between foreign and domestic manufacturing. It is the most effective means to accomplish this. It would improve the trade balance. 2) The revenue stream from sales would be more consistent than the revenue obtained from work, especially with the many deductions and credits that have evolved in the income tax system. Sales continue through depressed work conditions due to the availability of assets accumulated previously, so there is no significant drop-off in collections when unemployment rises. In addition, a sales tax would be an incentive to save, rather than an incentive to borrow, as many of our current tax deductions have become. Today we provide a tax exemption for borrowing (such as home equity loans) while taxing the interest earned on savings at the ordinary income rate. We tax work at a higher rate (federal rate plus payroll tax rate) than we do passive activity (capital gains rate on investments and dividends). A sales tax would rightly justify the elimination of the inheritance tax, as that income would effectively be taxed when spent by the receiver. Although there may be inequities with a national sales tax, the advantages far exceed the difficulties. I would ask that you seize this opportunity to make a major positive change for our country, and recommend replacing the federal income tax, corporate tax, Social Security/Medicare taxes and the inheritance tax with a national sales tax. |