A Taxing Conversion

I have always been a flat tax guy. When I was young and liberal, it was Jerry Brown that inspired me. Then, older (and wiser, I would say), it was Steve Forbes. Sure he had the charisma of a cardboard box, but he was a flat tax guy, too. A National Sales Tax never appealed to me. It was regressive. The poor would have to pay a greater percentage of their income in taxes. The flat tax, however, was imminently fair. Everyone pays the same rate. No loopholes (except, in some plans, for home mortgages). It was especially appealing when the tax would only apply to income above the poverty rate. The poor would pay nothing, everyone else would pay the same rate. Nothing could ever be fairer.
I don't know if it is necessarily fairer, but I am now convinced that a National Sales Tax is better. It was an article by George Will that finally pushed me over the edge. Under the current proposal by Rep. John Linder of Georgia, no one under the poverty level would pay any tax, as each month, the Sales Tax that would have been collected is returned in the form of a rebate check. But there are so many other reasons that it would be preferable to the current system.

1. It would encourage savings, as savings of any kind would not be taxed. To say that the savings rate in this country is pitiful is to be kind. An increase in the savings rate would mean that more capital was available for investment, which could even drive interest rates down again. More capital available for investment would result in more entrepreneurship, which would in turn grow the economy.
2. The underground labor market would dry up. Paying an employee under the table would not decrease tax liability. Oh, and then there are all those people out there who think that they can declare themselves 'Sovereign Citizens of the United States' and not pay any income tax would suddenly become obsolete. Fine, you won't pay any income tax - but just try and avoid the tax register. And, since nearly all states have a sales tax already in place, the infrastructure is already there to collect it - it is just that a portion of it would go to the Federal Government instead of the state.
3. The Trade Deficit would shrink. This is something that I hadn't thought of before, but, since the goods produced in the United States would be taxed only if they were purchased in the United States, our goods would have a competitive advantage in foreign markets. Conversely, foreign goods would now be taxed when they were sold in the US, evening the playing field. In fact, this would again give our goods a competitive advantage over the current system, because many of the foreign goods would be taxed twice - once at home, such as the European Value Added Tax, and once again in our domestic market, while ours would only be taxed once.
4. In the same way as the underground labor market would now be taxed, the illegal.. er.. undocumented workers that come across the border would also be taxed on anything that they spent here, and they would have to spend something.
5. Oh, lets not forget the money that would be transferred from preparing and filing taxes to actual consumption.
6. As Will points out, how about all the lobbying that goes on that is directly related to the tax code and its manipulation?
7. And who among us would miss the IRS?
8. Another good point is that Corporations don't really pay taxes, anyway. They include them in increased prices and we, the consumers, ultimately pay those, too. Why not at least make those taxes visible?

Anyway, I have finally found these to be pretty convincing arguments for a National Sales Tax. The initial suggested rate is 23% (of that over the poverty rate, remember), but I have heard that it might be possible to ultimately get the rate down to 18% (ok, this is admittedly a pipe dream - who ever heard of taxes being decreased).

So here I am, a flat tax guy who now feels that maybe his belief in the flat tax was as realistic as the flat earth, now a convert to a National Sales Tax. Sure, there are things that need to be hammered out, and I wouldn't want to see it without a corresponding repeal of the 16th amendment that authorized the income tax (otherwise we would end up with both), but for now, color me converted.