Friday, February 27, 2009

Federal Sales Tax and Abolishing the I.R.S.

Recently a House of Representative member introduced a bill for a national sales tax and the end of the federal income tax, and I.R.S. The bill sets forth a proposed sales tax of 23% on all goods sold, no exceptions. There are many interesting points in this bill. Many of the claims that they list as negatives of the current income tax seem to be present in their version of a sales tax. They claim the federal income tax is too intrusive, yet the bill requires mandatory annual registration of all individuals in every household for any monthly refund and it also requires a separate form to be sent to Social Security office stating a persons income (I assume having the Federal Government know your income is why they thought it was intrusive on individuals privacy). In a list of grievances of the Federal income tax they claim that it "hides the true cost of government by embedding taxes in the costs of everything Americans buy", how a sales tax would be any different is not exactly clear. They claim that the federal payroll taxes, medicare and social security have a "have a disproportionately adverse impact on lower income Americans" while leaving out the regressive nature of sales taxes, especially one as broad as a Federal Sales tax.
There are also a few tidbits which were probably added for specific lobbies, such as the ability for the Social Security office to use "Smartcards" that in doubt are laced with hidden fees. It should also be noted that the authors put collection and enforcement at the state level and will charge the Federal government only a "reasonable administration fee". While a debate on the merits of both system would be interesting, a partisan filled bill hardly accomplishes anything.

1 comment:

  1. Interesting topic.

    The NPR website has quite some audio chips on related discussions:

    Personally, I think the idea to replace federal income tax with a federal sales tax and hence to abolish the IRS is .... a joke.