The World According to Nick
My take on Software, Technology, Politics, and anything else I feel like talking about.
Thursday, May 04, 2006

Removing the Income Tax 

This is an idea I've thought about a lot over the last couple of years. I used to be more of a fan of the flat tax, but then my brother-in-law made a damn compelling case for a national sales tax, and pretty much sold me on the idea. Recently Virginal Postrel blogged briefly on it, in regards to illegal immigration, which brought it back to the front of my mind. So in an effort to get the discussion going, I thought I'd talk about some of the benefits of a national sales tax instead of the current income tax scheme.

Simplicity For Taxpayers: No complicated forms, schedules, tables, etc. No April 15th deadlines that everyone is worried about. In fact, since the majority of states already have a sales tax themselves, businesses are already setup to collect one for the federal government as well.

It Encourages Savings: Because you're taxed at the point of sale, rather than on your income, it automatically encourages savings. Everything you put in the bank and make interest on is not taxed until you spend it. In fact, because you aren't taxed until you spend it, there is more money available for you to gain interest on. No special IRA's or complicated 401K plans are required to avoid taxation. Just don't spend it, and you aren't taxed.

Black Market Money Is Taxed: There is no longer any money which is kept "off the books". Because the ultimate point of money is to spend it, black market funds are now brought into the open. Drug dealers who love to buy Cadillac Escalades, boats, and anything else are now being taxed, where before they weren't. Illegal immigration is now taxed, since illegals are now paid off the books (more on this later).

It Encourages Charity: Once again, since money you don't spend is not taxed, money you give to charities is automatically not taxed either. No complicated forms to fill out with itemized deductions. Just give your money away, and you don't have to pay tax on it.

It's Progressive: For all those liberals out there who love "progressive" taxes... the National Sales Tax is the most progressive tax around. After all, the point of being rich is to spend your wealth. So people who buys boats, and planes, and especially expensive mansions are taxed more than people who are simply buying clothes, food, and other necessities.

It Removes One Advantage to Hiring Illegal Immigrants: One of the reasons people like hiring illegal immigrants is to avoid all the paperwork involved in hiring someone. Illegals are willing to paid off the books, with no need for W-4's and complicated withholdings. By removing all that bureaucratic paperwork, so that every can be paid the same way, there is less of an advantage to hiring an illegal immigrant.

Granted it will increase the price on all goods throughout the country, but because the income tax is removed, you'll radically increase your income in one fell swoop as well. Not only that, but since more money will be taxable overall (due to black market money being taxed), the relative tax on people could actually decrease. Any thoughts?

Comments:

Well, you know that'll never happen, even though I like the points you put out there.

What I can see happening, is the gov't keeping the income tax, and adding a national sales tax. It wouldn't have to be a big sales tax, but it would add up in the end.

They would try to ram down our throats the idea that a one half of one percent national sales tax wouldn't affect an individual, but would add up to billions for the gov't by the end of the year.

Plus, if you get rid of the income tax - the IRS goes down to about a 12 person operation... and the gov't wouldn't want to lay off the thousands of people they overpay at the IRS now.... ;)

The national sales tax just makes too much sense, and that's why it'll never happen.

  Posted at May 04, 2006 1:08 PM by Blogger Kuflax  
Plus, my mortgage debt is now a lower % of my take home pay, so I can buy a bigger house.

My #1 concern with a national sales tax: Congress will eventually add back income tax and I'll be taxed more on everything.

  Posted at May 04, 2006 1:09 PM by Anonymous Anonymous  
There's actually a decent movement in favor of the FairTax, which is a national tax plan. It's supported by something like 55 Congressmen at this point. Obviously, there are a ton of hurdles, but it's one of my top issues. There are actually two Wisconsin Congressional Candidates that I know of who publicly support it. Paul Nelson in the 3rd and Jeff Tyberg in the 7th. Tyberg has to get past a primary against Nick Reid before having even a shot at 37-year incumbent Obey, but Nelson has solid support from conservatives with no primary and an incumbent who's been steadily losing popularity.

Anything is possible...even tax reform.

  Posted at May 04, 2006 8:02 PM by Blogger Joey  
And if you want to make sure that income tax didn't come back, which I agree would be key if a national sales tax went into effect... then we'd need to repeal the 16th amendment, which is what allows income to be taxed in the first place.

Prior to the 16th amendment, only sales taxes and taffifs were legal.

  Posted at May 04, 2006 8:14 PM by Blogger Nick  
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Name: Nick
Home: Wauwatosa, WI, United States

I'm a Software Consultant in the Milwaukee area. Among various geeky pursuits, I'm also an amateur triathlete, and enjoy rock climbing. I also like to think I'm a political pundit.


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