The Taxing System-A Better Way

There must be a better way to tax fairly and collect with less operational cost. Our present tax on income takes first and gives later in the form of goods and services.

It makes more sense for the federal government to tax goods and services and all savings above a certain level, say $100,000, since that allows an a choice on how and when we will be taxed.

I am proposing a federal sales tax - exempting food, personal housing and medical necessities, including health insurance.

The IRS, as we know it, could be abolished - producing tremendous savings. The States could collect this tax along with their state tax and a small federal agency would oversee the process. 

A five-year phase-out of income tax and phase-in of federal sales tax could be implemented. As income tax is reduced, sales tax could be increased to the required level.

The extra tax at the front of the five-year phase-in would go towards a balanced budget and be returned at the end of the transition period from money saved by scaling down the IRS. The five years would give displaced IRS employees time to find jobs in the private sector.

Social Security possibly would need to be increased due to taxation on spending, despite the exemptions. Some form of corporate or business tax may be necessary. I believe this would be an extremely fair system, cost less to operate, and cheating would be better-controlled. Giving would replace taking - we would be giving to Americans the right to decide how to spend all their money.

Additional Comments 

Much discussion has taken place on the regressive effects of a federal sales tax or as some refer a usage tax. Some believe that such a tax would hurt those Americans in the lower income area. Let me point out that if basic need items are exempt that they would not be affected. Also special exemptions on an automobile and education for those at an income level below, say $20,000, could be allowed. Other exemptions based on income could be allowed, but should be reasonable basic need items.

A tax system as the one proposed would help collect the $100 billion plus which the IRS believes to be unpaid from American tax payers. Also, part of the illegal money in the country from illegal drugs and gambling would have a better chance of being collected through a federal sales tax. Eventually, some of the money would be spent at which time taxes would be collected. Complicated and lengthy tax forms could be eliminated. The state tax collectors would also collect the federal tax. There would be far less people to check for cheating with this system. 

Banks and financial institutions would need to report to the government balances on account for its customers to comply with the savings exemption as covered earlier. This system could be set up to encourage those with large sums of money to use it for the creation of new jobs. This approach to taxing would encourage a level of savings, but would also encourage a circulation of money that would create jobs. 

The cost of running the IRS would be cut dramatically. In fact, some people believe the IRS is unconstitutional. There really would not be a need for the IRS as we know it today. It could be replaced with a smaller federal agency. Any corporation not collecting a federal sales tax on at least 90% of their sales would be subject to a corporate tax. 

Let me point out that the amounts and percentages are adjustable to fit the need of success for the businesses and the necessary amount of money needed to operate the government and reduce the national debt. The first priority should be to streamline our governmental systems and cut spending with better ideas. I would suggest that a balanced budget amendment might be in order considering the nations debt level.