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... BIBLIOGRAPHY
SECTION I:
INTRODUCTION
Recently a new tax system has been proposed to congress. This system is called the Fairtax proposal; it has a national sales tax as its basis. ... The proposal would eliminate individual and corporate income tax, the capital gains tax, the estate and gift taxes, and non-trust-fund excise taxes. In their place would be a 15% national sales tax. All consumption up to the poverty line would be rebated so the sales tax would not affect families living at or below the poverty line. Abolition of the International Revenue Service would also be a result of the National Sales Tax. The states would bear responsibility for instituting the tax, yet they would be reimbursed for the cost of collecting the tax. The IRS would be abolished, and a much smaller, less intrusive federal excise tax bureau would collect trust fund excise taxes such as the gasoline tax. ... The main problem with sales taxes are that they are regressive and generally punish the poor more than they do the rich, as the poor are forced to spend more. Because of the rebate on sales taxes that go up to the poverty line the poor are benefited by a generally regressive sales tax.
Section II
Review of the Literature
The reasons for the national sales tax are numerous. ... income tax system suffers from many defects that are easily recognizable by those who have to pay taxes each year. ... For example, an NST should promote higher rates of economic growth by dramatically reducing the tax bias against work, savings, and investment. The marginal tax rate on consumed income that workers and investors face would be much lower, and the return on savings and investment would not be taxed until spent. Moreover, an NST would reduce economically inefficient distortions in the pattern of investments that are now dictated largely by tax shelters, deductions, and special-interest loopholes. The magnitude of increase from a flat tax base is greatly debated by economists. ... They do not usually account for the large capital from abroad that a sales tax is likely to create. They tend to attach little importance to microeconomic efficiencies that would be caused by eliminating tax options. ... Thus, there is reason to believe that replacing the current system with a national sales tax may cause economic growth greater than that predicted by the Jorgenson Model (Burton, 1997).
There are many problems associated with a national sales tax though.
Approximate Word count = 2022
Approximate Pages = 8.1
(250 words per page double spaced)
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