I have been contemplating the idea of a national sales tax for some time now. As an accountant, this would definitely decrease our workload with regard to income tax filings if we were to replace the income tax system with a consumption tax. However, I can see some real benefits from a national sales tax:
- Decreased administrative burden on the taxpayer (just like with state and local sales taxes, the administrative burden would be on the business, not on the consumer).
- Increased dollars for consumption in the economy as the cost of tax preparation is decreased (filing additional sales tax reports would likely be much less costly than the enormous number of income tax returns filed now).
- Increased efficiency in funding the government (the government is inefficient enough the way it is, they way it collects revenue should not be so inefficient as it is now).
- More transparency (a sales tax is rather up front when you purchase goods rather than being buried in how one defines income and deductible expenses in an income tax system).
- Reduced favoritism (there may still be favoritism based on what is defined as a taxable sale).
- System is still effectively progressive in actual dollars as the wealthy consume more than those with less means.
- Encourages citizens to save rather than spend (instead of penalizing earning more).
- May help differentiate between luxuries and necessities (American consumers are confused about the difference between what the ‘want’ and what they ‘need’, progressive rates on luxury items could help clarify this to some).
At the end of the day, the purpose of taxation is to fund the government in a way that does not place undue burden on the citizens. I do not think it matters much to the citizens the way the government is funded. However, it seems the government likes to be funded in the way that allows it to exert the most control over it’s citizens.