It’s Fix the Tax Code Friday! It’s also Black Friday – for those of you who are outside of the US, it’s the traditional first day of shopping for the Christmas holidays, the day after Thanksgiving. It’s called Black Friday because it’s the day that retailers count on to turn the year in red (deficit) to black (profit). So, today cash registers are ringing off all day long. Which brings me to today’s question…
In other parts of the world, there is a national sales tax or consumer tax, at a high percentage which replaces or largely subsidizes an income tax. An example of such a tax is the VAT, the value-added tax, assessed in the EU on goods and services; it can be as high as 20% in some countries and more than that in countries like Belgium, Poland, and Portugal.
The argument often made is that a true “national sales tax” would be less complex than the existing tax code and would be fairer since people are paying the same amount of tax for the same amount of goods and services. The argument against it is that it’s as complex as the existing tax code (the VAT rate chart alone with exemptions and explanations for 2006 is 34 pages long) and that it’s what’s known as a regressive tax, which means it hits those with less money harder than those with more money (the idea that if both people pay $2 tax on a $10 purchase, it is more difficult for the poorer person to bear that cost).
That brings us to today’s Fix The Tax Code Friday question:
Should the US establish a national sales tax on consumer goods and services?
