Enforcement will be a nightmare and evasion will be rampant. The analogy between witholding taxes and sales tax is best when used on a cash basis. Employers who pay cash, don't withold taxes, don't report those payments, and neither do the employees. So many cash basis merchants will be tempted to collect the full price, selling plus tax, but not report those taxes. So here you will have a huge audit and enforcement division to handle this. Right now, luxury good sellers, from antique dealers to jewelers, etc. connive with customers (rather, they bow to the customer's demand) that they ship empty boxes out of state to avoid state sales taxes. They will think up new ways to avoid new taxes. Especially when it falls upon the merchant to collect and pass on those taxes. THis is the chief reason Dick Armey opposes the national consumption tax, not on the grounds that it is not fair, but that it will be difficult to enforce.
(1) So, we agree that business already collects taxes on behalf of the government. (2) Savings is only cherished by those who profit by the spending of others. I merely suggest that a sales tax permits the saver to control his/her money, whereas now, the saver has no personal control at all. (3) Government already uses the income tax to support and dampen various economic sectors. It does similarly with interest rates. A sales tax would permit the government to modify its behavior faster than is possible under current income tax law. This sort of efficiency may not be a net improvement, but we won't know until it's tried. One thing is for certain. The current system is a bureaucratic nightmare and the country has unprecedented budget deficits. This is not a case of "don't fix it if it ain't broken."
You are wrong about enforcement. I invite you to contact any government taxing authority and ask the head of the auditor division whether sales tax is easier to audit than income tax. As for what people do to get away with not paying taxes, in Oregon, where there is no sales tax, there is a huge underground economy, precisely because people can buy and sell and legally never report the sales, thus there is no easy way for government to know if anyone ever earned any income, so the participants don't pay their income taxes, either.
It's pretty funny when I see folks think that the feds are gonna give up that gravy train called income taxes. There are a whole lot of people who get fed every day because of various tax deductions, incentives and credits. Nearly every single congresscritter (and prolly all of them) gets money from folks who make their living by defending and creating tax code modifications. Income taxes have nothing to do with revenue generation and everything to do with power generation. It's the raw power of the tax code to pay off "investment" by lobbiests to reward congresscritters that insures it will be around as long as there exists politicians who are less than ethical. And that's not counting all the H&R Blockheads and associated hangers-on. Plus IRS auditers, tax lawyers. . . Christ you'd wreck the economy overnight by making income tax simple, let alone eliminating it.
Your Oregon example is difficult to understand. If people don't have to file sales tax returns, how does that prevent them from reporting net income, or encourage them to not report earned income? I report sales tax and net income, and the two have no relationship tax-wise.
If a person buys $10 worth of goods wholesale and sells them for $20 from a storefront, and there is no sales tax, then the government has no authority to enter the store and inquire as to what's being sold and for how much. By the time tax season appears, the person has closed the store, pocketed the cash and disappeared sunset. Enforcement of the underground economy is difficult. But, with a sales tax, the government simply walks down the boulevard, enters the store, because the store shows no franchise board tax certification, asks to see the receipts, and demands the tax money. If there aren't any books, the auditor can merely look at the inventory, the traffic and estimate how much gross revenue has been generated. Enforcement is simple. I'm not saying that there aren't ways around the income tax laws -- but, sales tax liability is easier to audit.
I'm not talking about eliminating taxation. I'm talking about replacing it with a more efficient system. However, you're correct that there's an intrenched buracracy. It's really up to the People. And, I admit that the average person feels a sales tax with every purchase, vs. an income tax that prevents them from ever seeing their income in the first place. So, if the People want to remain blissfully ignorant while the government steals their money and fritters it away, then nothing will ever change. I don't really care. I've made plenty of money over the years giving out arcane tax advice. But, the question was asked about what would work better, and there's no doubt in my mind that a sales tax would be far superior to an income tax in terms of "bang for the buck."
Pabst: >Besides, why should a merchant have to >serve as an unpaid tax collector for the >Federal government. WTF were you thinking when you made that statement Pabst??? Merchants/businesses *already* act as unpaid tax collectors for the Federal government...it's called payroll taxes. JB
As I mentioned earlier Turok, Social Security is not just a tax "collected" by business, but PAID and contributed by business. A wage earners Social is half his contribution, half his employers. Yes that makes business a de facto collector. BUT it's different than asking merchants to "tack on" a super high sales tax and then be responsible for the book keeping. Especially if you get into this BS of different sales tax rates for different items ect.
Personally, I like the idea of a national sales tax because IMO I will pay a lot less in taxes and could find easy ways to avoid its impact. Politically, I think it is DOA: 1. Members of congress get a lot of money from campaign contributors to tinker with the tax code (to reduce taxes for the big contributors), that is why the tax code is 1000s of pages long. 2. When the news gets out that you medical bills go up 25% and your health insurance goes up the same amount, the opposition will have a field day. 3. On top of the impact on medical costs, as I understand the proposal, state and local services will be taxed. So, you have to pay the 25% tax on the public or private education your children receive. That means the funding for them, usually real estate tax, goes up 25%. Police protection gets taxed, so the money for it has to come from somewhere. Drivers licenses, car registration, etc also will be taxed. There are many more examples but these should be more than enough for its opponents to use to kill it. Also, the 23% rate has as an underlying assumption that there will be no cheating; IMO a silly assumption. DS