|Tuesday, March 7, 2000||
Volume 65, Issue 110
Elrod on taxes
|So what about a
national consumption tax?
R. Alex Whitlock
In an egalitarian system, everyone would pay the same amount in taxes each year. Every American would shell out $5,000 or so to the federal government (a family of four would pay $20,000), and all would be right with the world. Well, perhaps not, but apparently anything that takes into account what a person can or cannot afford is unfair in the eyes of many conservatives.
Though no one truly proposes or supports the flat rate model above, it is the only way to get rid of the "unfair" tax system that conservatives deplore because the system "discourages wealth." Ironically, their two most common proposals also discouragewealth. In reality, neither the flat tax nor the national sales tax is inherently any more just than the current graduated income tax model.
Many argue that the current model discourages wealth because the richer you are, the more you are taxed from a percentage standpoint. This is a false argument because it applies to all three models. You'll pay a larger dollar amount under any model except my flat rate proposal. But even the most conservative congressman knows that some families can afford to give up $20,000 while others simply can't.
However, they erroneously assume that as long as the same percentage is taken out, the different families will be equally affected. If a family makes $15,000 a year, the amount of $3,000 for taxes means a lot more to them than a family making $15 million a year, paying $3 million in taxes. The former family is likely to spend their money on essentials for themselves or their children while the latter is more likely to buy a more expensive car or faster computer.
Quite simply, wealthier families can afford not only to pay a higher dollar sum, but also a higher percentage of their income.
So, what about the national sales tax, which wouldn't tax success like the current income tax? The government would be taxing money spent. The more you make, the more you'll spend. Indirectly, you'll still be taxing work. Attempts could be made to leave the essentials untaxed, but such plans don't always work. In Texas, for instance, food is not always considered a necessity as it is usually taxed. If food isn't necessary, I don't know what is.
In fact, under the national sales tax, the poor might pay a higher percentage of their income in taxes. Since the poor live hand-to-mouth, they will need to spend every dime they make. Wealthier Americans will be able to save their money, put it in the bank (untaxed) and use it to make considerably more money before they are ever taxed. Some conservatives talk about adding tax credits or rebates to offset this penalty on the lower class, which brings me to the next argument.
Some say a sales tax is better because it will get rid of our awful tax code. While the tax code is excessive, burdensome and unfair to those who don't know how to work the system, there is no reason why the tax code can't be replaced with another income tax without all the penalties, credits and confusion. Critics respond that the code will inevitably become complicated again. Maybe so, but if you start adding tax credits and rebates to the sales tax as suggested above, then it's likely the sales tax will also become complicated.
I'm all for reviewing the tax code and simplifying it. I'm all for finding a better way. However, if there is a better way, I haven't heard it yet.
Whitlock,who has never met anyone