National Retail Sales Tax Reform

There has been a debate going on for years about a way to get rid of the Federal Income Tax and the IRS and still have the money available that normally comes from federal tax returns that individuals do every year.  A proposal has been made for a National Retail Sales Tax, also called a Fair Tax, to replace the Federal Income Tax paid every year.  With a National Retail Sales Tax, each time you purchased a product or service you would pay your federal taxes as a federal sales tax, this would be on top of any state tax that might already be in place. The Fair Tax means that the federal government would no longer withhold federal taxes from individual’s paychecks and no one would need to file federal income tax returns because the federal income tax system would be eliminated and the IRS would likely become non-existent. Dissatisfaction with the current income tax continues to generate interest in this alternate Tax method.

This was one the proposals made during President Bush’s second term as a federal tax reform.  This, in my opinion means it’s purpose is not likely to help the poor by having them pay less taxes, but instead it makes the tax burden equal even for low-income individuals.  Those who are in the highest income and lowest income groups will all pay the same National Retail Sales Tax on things that they buy and it will not matter how much money they make.  With the current tax system, the level a person is taxed depends on how much money they make each year.  While the poor cannot avoid the tax, I believe it is fairer to everyone than the supposed Fair Tax. 

Also, there is the question of exactly how much this new sales tax would be, and it is likely that to keep the government programs that are currently funded by income tax running as they should, that the rate for the National Retail Sales Tax would be very high, and then I believe that less people will be likely to support it.  While it is unlikely to gain more approval under President Obama, it continues to be an issue that many people support simply to get rid of the federal income tax system currently in place.  It will only end up benefiting the wealthy and definitely hurting the lower and middle classes.  I don’t believe that any change to the current tax system will be progressive at all.  In fact, the results suggest that exchanging our current system for a national retail sales tax would actually be a regressive shift when it is measured against annual income.