At least with a sales tax, it is clear what we are giving exemptions for. As it exists today, the income tax changes benefit (mostly) the people who can afford attorneys and CPAs who know what the loopholes are. I would rather have a tax code that is easy for ANYONE to figure out. Perhaps so, but that is an exemption that I would support under certain circumstances (for homes valued at less than $250,000 or so for instance). Again, one main goal with a national sales tax would be to make exemptions transparent rather than hidden as they are under the current tax code. As I mentioned at the top, I would give a $5000 exemption for each adult and $2500 for each child every year. This could be accomplished with an exemption card so that the family could decide what they pay tax for and what gets excluded from taxation. And a consumption tax would make the process more transparent while still providing the tax breaks that Americans need. Those are only a few of the questions that we would need to answer, but I think that one of the big benefits a consumption tax would provide is more encouragement to save money rather than spending it all. If we changed the mindset of the country as far as savings go, it is possible that Social Security could become a thing of the past as people start providing for their own retirement.
Andy your points are well taken, but that was my point I was trying to make. You may set up a simplified system but it will be much more complicated than anyone wants. You've stated 2-3 exemptions that you think would be necessary, I'd throw in you need a way to encourage people to not only save for retirement but also protect the money from being used for an impulse by (thus a retirment credit on the sales tax), and then the senator from Missouri wants to help families whose kids are in college (education credit on the sales tax), and the senator from California wants to encourage companies to be enviromentally friendly (credits for non-gas powered autos for example). So again Andy I think you (and many others) have the right idea. But the problem is unless you have a "flat" tax (either on income or consumption) their will be too many opportunities to get special interests in the law. Basically if you have one exemption everyone will think thjis group needs an exemption too. Also would businesses be excluded for their purchases (raw materials)? If not it's possible wages may be cut.
I would be OK with an absolutely flat income tax with ZERO exemptions or deductions, but since this would raise the effective tax rate for the wealthy, I think that idea is a non-starter. As far as the exemptions to the sales tax, I just think that those exemptions would be far more straightforward and easy to debate. Exemptions for education and medical care are no-brainers, but exemptions for Lear jets and $6000 toilets would be FAR harder to get through. The point would be to make the process of taxation as transparent and easy to understand as possible, which a consumption tax would be compared to the 5800 pages of income tax code we have now. In addition, a consumption tax would cost FAR less to implement and enforce. Nope, they pay the consumption tax just as we do and then pass on most of that tax when they sell their product. They wouldn't have to lay anyone off as they wouldn't be paying corporate income taxes.
