National Sales Tax

So did everyone notice that a man opposed to the income tax got into his airplane and crashed it into the IRS today? Classy. Yes, I too feel that an excellent way to express my right-wing frustration is to personally reenact 9/11. I really, really hope that the Tea Party movement finds this as quaintly ironic as I do.

But enough inappropriate bemusement. I’m going to use this psychopath as a prompt to write about a popular right-wing cause. In doing so, I assume I will show my ignorance on the topic. Please feel free to correct me when I say something that is horribly incorrect. Because this seems like such an open-and-shut case to me, I assume that there is a whopper of an error in here somewhere.

That said, how about a national sales tax? We could implement one, and then do away with the income tax. This is, as far as I know, a modern conservative’s wet dream. I suspect many independents and left-leaners would be all for it as well. I think it sounds pretty sweet myself. If I’m correct about its likely popularity, democracy would have no trouble at all making it the law. So why is this not happening?

Let’s take a moment to spell out the details of what I think the idea means. I think “abolish the income tax” is a pretty clear idea to everyone, so I won’t stress about that. As I understand it, a national sales tax is extremely similar to the state/city/county/whatever sales taxes that are already in the books. Some percentage of the value of the goods and/or services is added to the total bill, raising the final price. That added charge is then collected by the federal government as income. Because sales taxes are already omnipresent, implementing one would require practically no special effort. In addition, people are already policing to make sure that sales taxes are actually enforced. That means that the federal government could very likely cut its staff of “tax police” (currently IRS agents) by a huge margin. That would further decrease federal spending on salaries, and reduce the need for tax income. That would be a savings in and of itself.

One critique of a national sales tax is that a blanket tax places a disproportionate amount of the tax burden on the poor, given that the wealthy tend to save large amounts of their income (as opposed to spending it and thus paying sales tax). Let’s take the controversial stance of simply assuming that a flat tax is undesirable, for the sake of argument. (You are free to disagree that a flat tax is bad, but I hope you agree with me that we do not currently HAVE a flat tax, nor are we moving closer to having one under the income tax system. That said, please accept my hypothetical condition.) Because of this, my understanding is that basic needs, such as basic clothing and foodstuffs will not be subject to the tax. This policy is already in effect for some state sales taxes. The net effect, then, is that it is primarily luxury goods and services that are taxed. The net effect is that extremely wealthy people who are into conspicuous consumption pay huge sums in taxes, while people who are just scraping by do not. This is fairly similar to the end result of the current system. It introduces a fairly level -- and very simple -- playing field in terms of motivation to save. If you save money instead of spending it, you do not pay taxes. If you buy an original Hummer and feed it $500 in gas per week, you are personally financing welfare programs.

To me, this seems like it would be a wildly popular system, and one that provides a simple, user-friendly motivation for sensible lifestyle choices. Under the income tax, similar motivators exist in the form of IRA’s, 401(k)’s, and the like, but I suspect that most people find these overly-complicated and inaccessible.

Taken together, I think that a national sales tax is a no-brainer. Most people, especially the politically-cranky, would love it. Financially, very little would change. The national sales tax could be set to a value that would generate a cash flow identical to that of the current income tax. In practical terms, the individual cash flows from each citizen would be very similar, except that the system that draws them would be much simpler and more transparent.

That said, what am I missing? It must be something, because if the statements above are correct and comprehensive, the only thing that is not explicitly stated is that we have an income tax because Democrats enjoy making fun of pissed-off Republicans. I hope that that’s not it.