Facts About Nationwide Sales Tax
The nationwide sales tax, or flat tax as it's more commonly known, is a national taxes on goods purchased at retail operations. In theory, this tax is supposed to replace the direct tax system that the IRS coordinates and runs. Businesses would absorb the burden of paying local, state and federal taxes. Switching to the national sales tax removes tax loopholes and requires everybody to pay taxes. The more someone buys something, the more taxes they pay.
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History
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During most of U.S. history, a person paid taxes if they exported, sold or imported goods. Most taxes came from trade and business activity. Direct taxation made an entry during the Quasi War with France between 1798 and 1800, where people had to pay taxes directly to the government. This was temporary; after the War of 1812, Congress repeated all tax laws, choosing only to receive taxes from land sales and customs. By the turn of the 20th century, people saw that charging excess duties on imports was bad business practice. Direct taxation made a comeback. Over the 20th century, people found loopholes to try to gain a tax advantage.
The Nationwide Sales Tax
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Under a nationwide sales tax, all forms of federal taxes would be abolished and replaced with a sales tax. It would include a provision that protects people living under the poverty line from paying federal taxes. Under this plan, people would keep their entire paychecks and retirement checks. People under the poverty line would receive advance refunds for basic necessity purchases. There would be no loopholes, as everybody would pay taxes; the IRS would be reduced in size or eliminated.
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Nationwide Sales Tax Opposition
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Opponents of the nationwide sales tax argue that this tax system would be a burden on the middle class. They also argue that the less money a person makes, the higher the percentage of their earnings would go to taxes. This is based on people purchasing according to what they need, mostly food and basic necessities. They also argue that the government could become aggressive and increase the sales tax, reducing what people could eventually buy. The government could also keep the nationwide sales tax and levy a traditional income tax.
Advantages
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The nationwide sales tax removes the complexity of today's tax system. Even hourly employees have ways to lower their tax liability, either through the standard deductions or through itemization. Child, education, caregiver and other credits require formulas and come with criteria that change every year. With many different tax cases, even a 500-page book doesn't thoroughly explain the tax laws. The flat tax simplifies things; a person pays his federal taxes when he makes his purchases.
Geography:
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A nationwide sales tax is applicable to people living in the United States. Under the current tax system, American citizens living overseas are still responsible for paying U.S. taxes and for filing their income taxes with the government. Under the nationwide sales tax plan, these Americans will no longer be liable, or required, to pay federal taxes. Foreign citizens living in the United States will pay this tax when they go shopping.
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