National Sales Tax vs. Current U.S. Tax Code Compared

Introduction: The Case for Tax Reform

Tax reform has been a persistent topic of debate in America. At the center of this debate is the idea of replacing the existing tax system with a National Sales Tax and comparing that alternative to the current tax code. A new way of collecting taxes seems far more fair and equitable than the current income tax method, which many view as antiquated and unjust. Some large corporations and America's wealthiest individuals pay very little or no taxes by exploiting tax loopholes, which means the system relies disproportionately on those who can least afford to pay. One expert notes, "Certain business entities such as partnerships, small business corporations and limited liability companies are treated for tax purposes as conduits and pay no federal tax at the entity level" (Boyd, 2005).

There has been growing discussion about developing a more equitable system — one that would be fair to everyone, not just a privileged few. Developing a national sales tax system could help decrease the budget deficit, make taxation fairer, fund other government programs, and make tax season much simpler for most Americans.

Some form of tax reform has been on many people's minds for years. President George W. Bush raised the issue during his administration, prior presidents addressed it before him, and advocates have called for reform for decades. However, simply switching to a national sales tax system is not as straightforward as it might appear. Expert Boyd explains, "Tax reform is much more complex than lowering or raising taxes. It implies shifting the burden among taxpayers, or changing the financial activity being taxed" (Boyd, 2005). That, of course, is inherently controversial, which makes any attempt to restructure the tax code a politically charged undertaking.

References

Boyd, T. (2005). Tax reform in a global economy: Shifting the tax burden. Review of Business, 26(2), 48+.

Source note: This business journal is largely impartial in its judgment, making the article more balanced and fair than one produced by a pro-VAT advocacy source. It is conservative in orientation but acknowledges the positive aspects of a VAT for businesses and individuals, and how it would simplify conducting business in a global economy.

Kotlikoff, L. J. (2008). Why the fair tax will work. Retrieved 12 June 2009 from the Americans for Fair Tax Web site:

Source note: This website advocates a VAT proposal called the "Fair Tax," and exists to persuade Americans that a national sales tax is desirable and workable. This particular article refutes an economist's claim that the tax is a bad idea, making it subjective at best — the site is funded by like-minded individuals who may be unwilling to engage fully with the opposing view.

Montgomery, L. (2009). Once considered unthinkable, U.S. sales tax gets fresh look. Retrieved 12 June 2009 from the WashingtonPost.com Web site: http://www.washingtonpost.com/wp-dyn/content/article/2009/05/26/AR2009052602909.html.

Source note: A journalist's examination of how a national sales tax could benefit the country, the economy, and the budget deficit, and how the VAT operates in Europe.

Rockwell, L. H. (2008, April 14). The great tax myth: By law we must collect tax. The New American, 24, 13+.

Source note: A conservative article that argues against the VAT for several reasons, including the assertion that it will not reduce overall taxes, will be difficult to administer, and will be subject to loopholes just as the current system is.