Do you hate the income tax so much you would be willing to spend an extra 23 percent on all of your purchases?
Complaints about the federal income tax are never-ending, and now presidential candidates are running on the concept of ending the tax entirely.
But the federal government has to have some income to operate, and many tax observers think a national sales tax could replace the income tax as a viable source of federal revenue.
There are many angles to the argument between proponents of an income tax versus proponents of a national sales tax, but it comes down to one main topic: should citizens be taxed on the amount of money they earn or the amount of money they spend?
The complaints about the federal income tax is that the tax law is too complicated, and the reach of the Internal Revenue Service has gone beyond the original scope of the agency. The organization Taxpayer Advocate reports that tax laws change daily, and often more than once a day, as Congress enacts new laws.
Opponents of the income tax say it stymies both productivity and job growth, claiming small businesses simply can’t operate having to pay income tax while starting up. Returning the IRS to an excise collection agency with no purview over American citizens would increase job creation and encourage small businesses.
The national sales tax, proponents suggest, would promote savings, which is considered a significant negative aspect of current American personal economics. While it would decrease personal spending, that would lower prices and that in turn would lower consumer debt.
A national sales tax would have to be set at about 23 percent initially, which would severely decrease spending, which would in turn decrease revenues and profits.
Opponents of the national sales tax say it is regressive, in that poor Americans are required to spend more of their income just to stay alive. Wealthy Americans can choose to spend on luxuries, while the poor must spend a high percent of their income on food and clothing and housing, and all of that would be taxed at the same high rate.
Proponents of the national sales tax say decreased spending would increase savings which could then be turned into investment dollars down the line. But opponents say few Americans are in a position to consider investing anything, as they are already having trouble saving for college spending or rainy day events.
The implementation of a national sales tax in place of an income tax might not affect tax cheats. Sales would have to be recorded to have the sales tax added, and high end consumers and producers could encourage cash sales to avoid the tax.
An additional issue related to the national sales tax is that all internet sales would have to be taxed at the same rate; otherwise, all sales would take place on line and no revenues would be produced.
Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.
In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.
McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.
McDill is the father of four children, and an active fan of soccer, Jimmy Buffett and all things Disney.