Only days after the last elections for Congress in November of 1994, CongressmanBill Archer declared his strong desire to tear out the income tax by itsroots. After that, Newt Gingrich and Bob Dole formed a commission to considernew alternatives to the income tax. That lead to more than a half dozencongressional panels holding hearings on that subject. So there is no longer aquestion of whether the income tax system will be replaced or not, the questionnow is, what should it be replaced with? Well, a national sales tax is an optionthat cannot be ignored, even though it may not be the best solution.
The casefor a national sales tax begins with one greatly appealing line. It will allowus to completely eliminate the income tax, possibly even repealing the 16thAmendment, an amendment that authorized the income tax and made it a part of thegovernment in the first place. However, the change would come at a cost greaterthan seems fair: we would give up the income tax for a sales tax system that ismore bothersome and pervasive.
If the government sets out to collect a new taxat the register when something is bought, it will then have to extend that taxbeyond the retailer to every single layer of production as well. The governmentwould absolutely have to do this because a great amount of tax evasion wouldcertainly take place. Soon enough, the national sales tax would become a verycomplex, multi-rate, value-added tax, or VAT. To generate enough revenue bytaxing goods at the retail level only, a sales tax of at least 20 percent wouldhave to be put into place. Suddenly, consumers will be seeing that everythingthey buy has been increased in price by that 20 percent. However, the peoplewill not want to pay that high of a tax, so they will find ways to say that theproducts they buy are tax-exempt goods, they will buy the goods on the blackmarket with cash, or they will evade it in other ways. So in essence, a nationalsales tax will be undermined by a tax revolt immediately and quietly, which willtherefore mean that the government would respond with a value-added tax that noone wants. Whether or not the national sales tax evolved into a value-added tax,the government would become very closely involved in just about everytransaction between consenting adults. Even very simple purchases, such as afarmer selling his produce on the side of the road or the corner grocer sellinga loaf of bread, would be under the shadow of a government tax collectorcollecting his cut of the sale. Actually, if this is the case, every person thatoperates a business or sells anything outright, such as someone selling a car,would become a tax collector for the government. Some people that are lobbyingfor the national sales tax argue that by having this sales tax, we couldeliminate the Internal Revenue Service completely. This could decrease the costof running the government because the IRS agents would not have to be paid orgiven benefits. Instead, the states would collect the new federal sales taxthrough their own existing sales-tax systems. But again, there is a problem withtaking out the IRS. While there are 50 states in the United States, only 45 ofthem currently have a state sales tax, which leaves five states without. Thesefive states Im sure would not particularly like to enforce something forsomeone else, the government, which they already oppose enforcing uponthemselves. So while people argue that a national sales tax will help to removethe IRS from existance, the truth is that it will not eliminate any governmentagency, but rather increase the size of the government because politicians willbe able to just raise the tax whenever they felt so inclined. Another argumentthat the sales-tax backers have, is that if there is not income tax there willbe no need to file a federal tax form with the government because they pay theirtaxes when they make a purchase rather than when they are paid. But thats notreally correct. Under any type of sales-tax system, people would still need tofile paperwork with the government, only they would have to do it for totallydifferent reasons than they do under the income tax system. With the sales taxin place, many Americans would be facing a great increase in tax. Because thesales tax would be so high, the government would almost have to make a selectamount of products exempt from the sales tax, so many of the sales-tax proposalsinclude something about a rebate. However, the majority of Americans would stillbe required to file something with the government to get their rebate. If theywouldnt file, then they would be out that money and essentially be left witha large tax increase. Another thing that a sales tax is argued to help, is thattax will be collected from underground economies, such as drug dealing and theblack market. While people who work in these economies dont file incometax forms because what they do is illegal, they do buy things with the moneythat they make from their trade. So if the government cant get their taxmoney from the income, the can make a great portion of it back by taxing, say, asports car or a stereo that a drug dealer might buy with his drug money. Butwhile this sounds like a good plan, the government will actually still lose thesame amount of money. This is true because if there is an income tax systembeing enforced, the drug dealer isnt going to report his income, but if thereis some sort of a sales-tax system in place, the drug dealer would still not becollecting a sales tax from his customers, so there would be no sales tax fromthose people going to the government. Since the drug dealer would not bereporting either an income tax or a sales tax, neither system will get the moneyfrom the drug trade. That same thing would be true about the underground economyfor legal goods, which is a much larger market than drugs. For example, aplumber that makes a house-call may not report the money he makes off of thathouse-call, so if there was a sales-tax, the person who called the plumber inthe first place would not pay the sales tax on that house-call either. With allof the above said, there are two options besides the implementation of anational sales tax system. Leave the system as it is with the income tax, or usea flat-tax system. A flat-tax will put into place a single tax rate on allincome. People will be able to spend their money however they want to do it andwill not have to take taxes into account before they spend. Instead of fillingout a large amout or paper and wasting a large amount of time on their taxforms, they would only have a small card or form to fill out and send in. For asmuch trouble as the paperwork, and time it takes to fill out the paperwork, isthe income tax system that is currently in place seems to be the only systemthat works for this time. With more work and thought, eventually the flat-tax ornational 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 leftalone until it absolutely needs to be changed and something that will reallywork can be created and easily implemented.
Cite this Income Tax System
Income Tax System. (2019, Jan 13). Retrieved from https://graduateway.com/income-tax-system/