National Sales Tax

        


Periodically, especially in times of high deficits, the idea of a national sales tax emerges among some economists and lawmakers. After all, about 150 countries haver a VAT (value-added tax) and the funds generated frequently account for half of that country's revenues. For instance in France the VAT accounts for 52%.  The tax usually applies to all purchases (including stock trades) and services,


The Congressional Budget office estimates that each 1% of VAT in the US would raise $1 trillion over ten years. Since we have a deficit of $1.4 trillion, the concept appears quite appealing. Maybe the guy who can afford to purchase a $1 million yacht could easily pay a national sales tax on that purchase.


The problem, of course, is that such a tax disproportionately harms the the elderly and the poor who spend most of their income on necessities like prescriptions and groceries. Others worry that with this extra revenue Congress will simply waste more


Contrary to many of the media and political loudmouths, I am not opposed to taxes. (cf. earlier post, "Taxes and Patriotism" 3/1/2010) However, I am opposed to a national sales tax based on its inherent inequity. Although flawed and in need of simplification, I think our national income tax is still the most fair system of providing funds for the necessary functions of governing. In fact I might agree with those who maintain that the income tax has been instrumental in making the US the super power it is today. Granted that income tax laws need fixing, the basic concept is more desirable than a VAT.