Taxes
Only days after the last elections for Congress
in November of 1994, Congressman
Bill Archer declared his strong desire to
"tear out the income tax by its
roots." After that, Newt Gingrich and Bob
Dole formed a commission to consider
new alternatives to the income tax. That
lead to more than a half dozen
congressional panels holding hearings on that
subject. So there is no longer a
question of whether the income tax system
will be replaced or not, the question
now is, what should it be replaced
with? Well, a national sales tax is an option
that cannot be ignored, even
though it may not be the best solution. The case
for a national sales tax
begins with one greatly appealing line. It will allow
us to completely
eliminate the income tax, possibly even repealing the 16th
Amendment, an
amendment that authorized the income tax and made it a part of the
government
in the first place. However, the change would come at a cost greater
than
seems fair: we would give up the income tax for a sales tax system that
is
more bothersome and pervasive. If the government sets out to collect a new
tax
at the register when something is bought, it will then have to extend
that tax
beyond the retailer to every single layer of production as well. The
government
would absolutely have to do this because a great amount of tax
evasion would
certainly take place. Soon enough, the national sales tax would
become a very
complex, multi-rate, value-added tax, or VAT. To generate
enough revenue by
taxing goods at the retail level only, a sales tax of at
least 20 percent would
have to be put into place. Suddenly, consumers will be
seeing that everything
they buy has been increased in price by that 20
percent. However, the people
will not want to pay that high of a tax, so they
will find ways to say that the
products they buy are tax-exempt goods, they
will buy the goods on the black
market with cash, or they will evade it in
other ways. So in essence, a national
sales tax will be undermined by a tax
revolt immediately and quietly, which will
therefore mean that the government
would respond with a value-added tax that no
one wants. Whether or not the
national sales tax evolved into a value-added tax,
the government would
become very closely involved in just about every
transaction between
consenting adults. Even very simple purchases, such as a
farmer selling his
produce on the side of the road or the corner grocer selling
a loaf of bread,
would be under the shadow of a government tax collector
collecting his cut of
the sale. Actually, if this is the case, every person that
operates a
business or sells anything outright, such as someone selling a car,
would
become a tax collector for the government. Some people that are lobbying
for
the national sales tax argue that by having this sales tax, we
could
eliminate the Internal Revenue Service completely. This could decrease
the cost
of running the government because the IRS agents would not have to
be paid or
given benefits. Instead, the states would collect the new federal
sales tax
through their own existing sales-tax systems. But again, there is a
problem with
taking out the IRS. While there are 50 states in the United
States, only 45 of
them currently have a state sales tax, which leaves five
states without. These
five states I’m sure would not particularly like to
enforce something for
someone else, the government, which they already oppose
enforcing upon
themselves. So while people argue that a national sales tax
will help to remove
the IRS from existance, the truth is that it will not
eliminate any government
agency, but rather increase the size of the
government because politicians will
be able to just raise the tax whenever
they felt so inclined. Another argument
that the sales-tax backers have, is
that if there is not income tax there will
be no need to file a federal tax
form with the government because they pay their
taxes when they make a
purchase rather than when they are paid. But thats not
really correct. Under
any type of sales-tax system, people would still need to
file paperwork with
the government, only they would have to do it for totally
different reasons
than they do under the income tax system. With the sales tax
in place, many
Americans would be facing a great increase in tax. Because the
sales tax
would be so high, the government would almost have to make a select
amount of
products exempt from the sales tax, so many of the sales-tax
proposals
include something about a rebate. However, the majority of
Americans would still
be required to file something with the government to
get their rebate. If they
wouldn’t file, then they would be out that money
and essentially be left with
a large tax increase. Another thing that a sales
tax is argued to help, is that
tax will be collected from underground
economies, such as drug dealing and the
black market. While people who "work"
in these economies don’t file income
tax forms because what they do is
illegal, they do buy things with the money
that they make from their trade.
So if the government can’t get their tax
money from the income, the can make
a great portion of it back by taxing, say, a
sports car or a stereo that a
drug dealer might buy with his drug money. But
while this sounds like a good
plan, the government will actually still lose the
same amount of money. This
is true because if there is an income tax system
being enforced, the drug
dealer isn’t going to report his income, but if there
is some sort of a
sales-tax system in place, the drug dealer would still not be
collecting a
sales tax from his customers, so there would be no sales tax from
those
people going to the government. Since the drug dealer would not be
reporting
either an income tax or a sales tax, neither system will get the money
from
the drug trade. That same thing would be true about the underground
economy
for legal goods, which is a much larger market than drugs. For
example, a
plumber that makes a house-call may not report the money he makes
off of that
house-call, so if there was a sales-tax, the person who called
the plumber in
the first place would not pay the sales tax on that house-call
either. With all
of the above said, there are two options besides the
implementation of a
national sales tax system. Leave the system as it is with
the income tax, or use
a flat-tax system. A flat-tax will put into place a
single tax rate on all
income. People will be able to spend their money
however they want to do it and
will not have to take taxes into account
before they spend. Instead of filling
out a large amout or paper and wasting
a large amount of time on their tax
forms, they would only have a small card
or form to fill out and send in. For as
much trouble as the paperwork, and
time it takes to fill out the paperwork, is
the income tax system that is
currently in place seems to be the only system
that works for this time. With
more work and thought, eventually the flat-tax or
national sales-tax system
could be implemented. However, aside from the hastle,
nothing seems to be
wrong with the current income tax system. It should be left
alone until it
absolutely needs to be changed and something that will really
work can be
created and easily implemented.