Wednesday, May 18, 2005

Flat Tax or National Sales Tax?

Didn't know what to write about today, but, since someone asked me yesterday what I thought of a proposed National Sales Tax (NST) to replace the Income Tax, I thought maybe I'd hit on that subject a little:

The problem with all these replacement tax proposals is that none really address the issue of the size of the federal government and the related government spending. They simply try to come up with a supposedly more convenient way to wrest the same trillions of dollars from the taxpayer.

The biggest problem I see with the NST is as Congressman Ron Paul pointed out: "If we try to replace the Income Tax with an NST, we'll likely end up with both an income tax AND an NST...". How true, since government, at all levels, keeps spending and spending. If we tried out an NST, it might start at 25 or 30%. but with constantly increasing spending, it would eventually end up at 40% or higher, unless the Income Tax was brought back to cover the shortfalls. It has happened before: We had an income tax during the Civil War which was repealed after the war until the politicians couldn't help themselves around forty or fifty years later.

One comment I've heard in support of NST is that "everybody pays..", since you supposedly can't escape paying taxes as some do by understating their income when reporting for income taxes. I tend to think that's a bad thing about NST. If there's anything good about the income tax, it's that many people cheat and some work in the underground economy, so the government gets less money. That's a good thing, in my opinion. There's some comments on that and other arguments against the NST in one of Harry Browne's recent journal entries you may be interested in.

Not too many people talk about the proposed Flat Tax anymore, it seems. I believe that was the one promoted by Dick Armey that you were supposed to be able to fill out and send in on a post card. I can't remember the percentage of income that was proposed. I believe some were saying 5%. Now I wouldn't mind that. Only concern I have is so many current exemptions might be disallowed so, depending on how they established exemptions, 5% may be too high or just right. I like the idea of the Flat Tax but the devil is in the details. I might actually trust someone like Dick Armey or Ron Paul to come up with a plan, but Armey's no longer in Congress and I don't think Ron Paul's in the position to have much influence on the details of such a plan. I don't trust most others to come up with a plan that would benefit people, as opposed to government.

Biggest obstacle to the Flat Tax, though, is those on the Left who can't stand the idea of "rich people" only paying 5% on their income though even with the Flat Tax I believe there was a proposal to have a cut off for the poor, as there is now with the income tax. Not good enough if the rich don't pay more, some say.

So, seems to me, the best idea so far is a flat tax, but it won't mean much if government continues to grow, especially as much as it has in the last four years.


At 6:40 AM, Blogger Fred said...

The Ludwig Von Mises Institute has an argument against the National Sales Tax on its web site at

Pretty lengthy and the author doesn't really give as good of an argument as the one in Harry Browne's Journal. Amazing how someone can write so much yet say so little.


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