My problem with a so-called "consumption tax" (which is really a national sales tax with a new name) is that it's going to be hard on the poor.

Someone who now pays no taxes, or pays few taxes and gets tax credits to help them out because they're raising a family on an income of $18,000 a year or something, is going to be paying taxes on loaves of bread and gallons of milk. It's not out of the question, in fact it's quite possible that bread and milk could be taxed until they're out of the range of the poor.

I'm not sure how this inequity would be addressed?

I would suggest not applying the consumption tax to certain necessitities, as many states do with their sales tax. Groceries and basic clothing, for example, might not incur a consumption tax. The idea would require some work to be feasible, particularly since it would require sufficient revenue to make up for the elimination of the income tax. Given how Congress tends to score such trade-offs, this would probably result in a revenue boon for the federal government; this would not be a good thing, in my mind, but I think it's an inevitable side effect, and it would still be worth it to eliminate the income tax.

Well, the article you linked to said, quite firmly, that everything, without exception, would be taxed, but I don't hold you to that. :) One can agree in essence without agreeing with all the details.

I think that when it comes to defining what basic items are "necessities," there's going to be a minimum 20-year debate before a list is agreed-upon.

Clothing, for instance, is going to be different depending on where you live in the country. Who establishes these lists and where are the cutoffs and will shorts be exempted in Florida but not in Alaska? (What if there's an abnormally hot summer in the north or cold winter in the south, are the poor people going to have to dig up the money PLUS the tax for items not approved in their area? Or would there be emergency legislation passed to "untax" sweaters so that poor children in Texas could be warmly clothed?)

Also, what constitutes a consumable? Power? Water? Heat? Auto fuel? Medications? (Over the counter or prescription?) How about disposable razors or razor blades or tinfoil or laundry detergent other commonly used household products?

What kind of food is going to be exempted? Lettuce? Carrots? Cookies? Milk? Donuts? Steak? What about exceptions for people who, although poor, have special dietary requirements because of health or religion?

Does everyone get the exemption or do you have to be poor to get milk without taxes?

Who supervises this whole process and watches for infractions or abuses? Instead of 120,000 mostly desk-bound IRS agents, are we going to have 120,000 agents wandering around the country making random purchases and watching for problems?

Anyhow, aside from all of that, let me point out that a tax is a tax is a tax and saying that someone can pay it when they buy a gallon of milk instead of having it taken out of their wages every week doesn't change the fact that it's an involuntary tax. People must have food, clothing, housing, transportation, and medication, after all.

Yes, a consumption tax would prevent someone with a low income from buying 3 CDs instead of 2 if the taxes on each were high enough, so they'd only buy what they could afford (and pay commensurate taxes) but doesn't the current system and the payroll tax collection method try do the same thing?

And what about the burden this places on businesses to collect, document, track, and transmit this money? Yes, they already collect and pass one certain taxes but this is a significantly larger task. And one you can't just leave and hope it will work because you're funding the ENTIRE government from it. You have to WATCH and make sure the money comes in.

Because I'm not sure how much space I have to ramble on in your comments section, I won't take the time to explore what's going to happen to small and fledgling businesses if such a cumbersome system is put into place, but let me say that all business responsible for collecting taxes already spend money on the process and the more they have to collect (especially on the federal level, where at least three times the paperwork is invariably required), the more it's going to cost them. How do we offset that? More corporate tax breaks?

Oh, yeah. And what *about* corporate taxes? Few corporations buy milk, after all. Do we continue to tax them separately? What does that do to the Supreme Court ruling about corporations being "persons"? Wouldn't it be illegal to treat them differently than other "persons"?

The first thing I can imagine from this "sales tax" system is the enormous boost it's going to give to the already booming black market economy in this country, but maybe I'm cynical. :)

To Anne:
Wow! What a lot of great questions!
Mom

If fixing the tax system was easy, we'd have done it already. :)

I'm just saying...the current system is sadly flawed and contains a multitude of injustices as well some some outright idiocies, but there really isn't any kind of easy fix for it and a national sales tax is a proposition fraught with the potential for the same or more types of abuses.