Even more controversial than the flat tax is the idea of abolishing the federal income tax entirely by repealing the 16th Amendment. In place of an income tax, some propose the use of a national sales tax. Many countries around the world levy a national sales tax, also called a value-added tax or VAT. The difference is that most of those countries also collect income taxes. The U.S. backers of a national sales tax want to get rid of the IRS and charge a flat 10 to 25 percent on all retail purchases of new goods and services [source: Montgomery].
What are the benefits of a national sales tax? Like the flat tax, a national sales tax makes tax collection vastly simpler. Workers could keep their entire paycheck and use that money to buy the things that they need.
Proponents of the so-called Fair Tax — a version of the national sales tax — include a provision called a pre-bate. This is a monthly check mailed by the government to lower-income families to subsidize their purchases. Advocates of a national sales tax also argue that a consumption tax collects revenue from everyone, even illegal immigrants, tax dodgers and tourists from other countries [source: FairTax.org].
Opponents of a national sales tax say it would put an unfair burden on the middle and lower classes, who buy a lot of the products that would be taxed. It might reduce consumer spending, thereby slowing the economy. They add that in order for a national sales tax to be fair, it should be applied to the purchase of stocks and bonds in addition to consumer goods. Under the Fair Tax proposal, investments are not taxed, although brokers' fees would be [source: FairTax.org].
Taxes are a bitter subject in almost every country, and the United States has had a decidedly tumultuous relationship with the issue. America has one of the most complicated tax systems in the world, and it grows more complex every year. In the end, whether you agree with paying taxes or not, you probably have April 15 circled on your calendar, embedded in your brain and on your list of dreaded days.
For more information on taxes and related topics, check out the links below.
- FairTax.org. "FAQs: How does the FairTax affect illegal immigration?" (Feb. 7, 2014) http://www.fairtax.org/site/PageServer?pagename=FAQs#20
- FairTax.org. "FAQs: What happens to the stock market, mutual funds and retirement funds?" (Feb. 7, 2014) http://www.fairtax.org/site/PageServer?pagename=FAQs#20
- IRS. "Brief History of IRS." (Feb. 7, 2014) http://www.irs.gov/uac/Brief-History-of-IRS
- IRS. "Personal Exemptions and Dependents." (Feb. 7, 2014) http://www.irs.gov/publications/p17/ch03.html
- Kaufman, Wendy. "Why Tax Day Falls on April 17 This Year." NPR. April 13, 2012. (Feb. 7, 2014) http://www.npr.org/2012/04/13/150549181/why-2012s-tax-day-falls-on-april-17
- Montgomery, Lori. "Once Considered Unthinkable, U.S. Sales Tax Gets Fresh Look." The Washington Post. May 27, 2009. (Feb. 7, 2014) http://www.washingtonpost.com/wp-dyn/content/article/2009/05/26/AR2009052602909.html
- Our Documents. "16th Amendment to the U.S. Constitution: Federal Income Tax (1913)." (Feb. 12, 2014) http://www.ourdocuments.gov/doc.php?flash=true&doc=57
- Rampell, Catherine. "How Rick Perry's Tax Plan Would Affect You." The New York Times. Oct. 25, 2011. (Feb. 7, 2014) http://economix.blogs.nytimes.com/2011/10/25/how-rick-perrys-tax-plan-would-affect-you/?_php=true&_type=blogs&_r=0
- Shinske, Caryn. "Leonard Lance claims federal tax code contains 4 million words, is 7 times as long as Bible." Politifact. April 15, 2013. (Feb. 7, 2014) http://www.politifact.com/new-jersey/statements/2013/may/02/leonard-lance/leonard-lance-claims-federal-tax-code-contains-4-m/
- Tax Foundation. "History of the Income Tax in the United States." Infoplease. (Feb. 12, 2014) http://www.infoplease.com/ipa/A0005921.html
- U.S. Dept. of Treasury. "History of the U.S. Tax System." Almanac of Policy Issues. (Feb. 12, 2014) http://www.policyalmanac.org/economic/archive/tax_history.shtml