Should the federal government repeal thepersonal income tax and replace it with a national sales tax? Should the federal government repeal thepersonal income tax and replace it with a national sales...

The current tax system in US is vast complex chaos. This tax system was recognized with
loopholes and biases that upset public who are saving funds to be used in future. The current tax
system is very complicated and treats general public in unalike way (General Accounting
Office, 1998). A normal tax payer takes around 26.5 hrs in preparing and sending their returns,
according to Internal Revenue Services. The Internal Revenue Service (IRS) has six central
income-tax brackets which range from 10 to 35 percent. The internal revenue code is now grown
to 3 million words and becoming complex and long.
The IRC is a statute written and regularly revised by Congress. Treasury
Regulations are more detailed rules framed and written by internal revenue service (IRS)
effectuating organization of IRC. The main elements of the present Federal tax system are
(Brown, 2009)
(1) Income tax for Individuals & Corporations.
(2) Payroll Tax which use to be paid on wages
(3) Excise duty taxes use to be paid for Goods & services
(4) Taxes for Generation Skipping, Real Estate and also Gifts
(Joint Committee on Taxation, 2013)
Introduction about the new System

National sales tax is a tax that is charged when goods are sold on such goods sold. The tax so
collected by Sellers from buyer/ consumer of the goods, is deposited to the government. The
Buyer/ consumer of the goods is not required to collect any tax and hence, is not required to file
any return for such taxes paid on goods. (General Accounting Office, 1998)
Various arguments are present in order to replace both the corporate and personal income
tax with either national Value added tax or with National Retail Sales Tax. Both these taxes have
been studied in detail. The consumption taxes are not imposed on income derived from
investment and savings, this attribute of the consumption taxes have resulted into high rate
(increased rate) of the savings which in turn have led to economic growth. This idea of
implementation of Sales tax and replacing Income tax is not a new idea; the issue has been
considered many times. Sale Taxes by central are popular in other countries around the world.
Since, such taxes have low burden when compared to Europe and Canada, it is at least credible
as the central government would collect sufficient funds by sales tax, if it replaces central taxes
as all taxes would get obtained from businesses houses, there would not be there any need of or
individual citizen for the payment of taxes and filing of their returns. The implementation
national sales tax system would lead to reduction of the administration cost of tax collection.
National sales tax scheme would bring a big change in utilization and working habits of the
citizens. (Brown, 2009)
Outlining the general characteristic of utilization of taxes before turning to specific
aspects of a national sales or value-added tax .The major five key points that need to be
considered while implementation of the consumption taxes is:
1. It is clear that American’s will utilize less and will save much however
there isn’t idea that how much savings will be achieved by moving to consumption based
taxation system as the American’s save less and consume more. Such movement to a
consumption tax base will not result in reduction of the overall rate of taxation on income
from capital to a large extent since, the economists trust that are already the taxes which
have been charged relatively light while management of accelerated depreciation, small
interest are absolutely lighter and unreported principal income is considered.
2. The load of utilization taxes will eventually fall much on lower and middle
income group People, whose consumption levels are high, will be liable to face higher
taxation burden if such switch to consumption tax is implemented. (Steven M. Sheffrin,
1996).
3. By introducing consumption based system will force load on accumulated
asset holders for once. By understanding the tax plans it could be possible to decrease the
load by creation of transition protocols successfully exempt tax on utilization which is
financed from accumulated chattels but the economist believe that by providing this
relaxation will decrease the increase in hoard and will hence lead to reduction in
economic growth that could be expected by the novel system.
4. With the new consumption based taxation system the industries will not
benefit, although it could be planned to enhance savings and investment. As the current
system favours the industrial development, there could be an issue with sifting to new
system, because the novel system is neutral about the investment policies (Gregory
R.Gajewski, 2012). Will be a disadvantage for industries with many interest deductions
and low investment levels on changing to consumption based taxation.
Under our existing system Housing is also favoured, as it permits mortgage
interest, does not tax attributed and allows deduction for property tax. Under burning up
tax sources which are not presently taxed would move into other added productive deeds
resulting in prices of homes because new purchasers will not be willing to pay as much
for housing without the profit of mortgage interest and chattels tax deductibility, but it
would-be thorny to recognize the size of its result. Large adverse effects on California
inhabitants and commerce from an augment in the taxation on accommodation are found
according to the studies...