Many Americans have proposed replacing the federal income tax with national retail sales tax. This would allow the government to levy a flat rate tax on retail sales thereby taxing consumer spending indiscriminately.

1. Could a National
Sales Tax Replace
Federal Income
Tax?

2. A Fundamental Tax Reform
 Lawmakers and state officials have proposed a
fundamental tax reform that would replace federal
income tax with national retail sales tax.
 Instead of imposing the highest amounts of taxes on
taxpayers’ earnings, the national sales tax would
focus more on what consumers spend.
 The government would levy a flat rate tax on retail
sales that would tax consumer spending
indiscriminately.

3. Replacing a Broken System
 An estimated $170 billion a year is spent on tax
filing.
 This has prompted both Democrats and
Republicans to seek a shift in the US taxing
system.
 Many argue that federal income tax results in
reduced productivity and decreased job
growth.

4. “Punishes the Productive”
Forbes contributor, David John Marotta writes that,
“[income tax] punishes the productive by taxing them the
highest amounts, reduces jobs by increasing the cost of
employees and reveals our personal finances and thus
invades our privacy.”

5. What Would Change?
 Income tax is often seen as an invasion of the privacy
of taxpayers who succumb to corporate and
personal income taxes.
 With the introduction of nationwide tax reform, the
Internal Revenue Service would be scaled down
substantially.
 There would no longer be a need for taxpayers to
report fiscal earnings or other personal financial
information. It may also help to reduce fraudulent
reports caused by the retrieval of sensitive financial
information.

6. Sales Tax: Unfair to the Poor?
 Critics of the national sales tax argue that the
tax would favor the rich because the poor
spend a higher percentage of their income per
year.
 Wealthy individuals with a high standard of
living would still pay the most taxes since all
Americans would be taxed according their
spending habits.

7. Critics also warn that in some
states, sales tax would soar. “In 29 of
the 39 states with both sales taxes and
significant income taxes, current sales
tax rates would have to more than
double to replace revenue lost from
repealing state income taxes,” argues
tax analyst, Martin A. Sullivan.

8. Those in Favor…
 Those in favor of national sales tax say it would encourage decrease spending and
reduce the price of goods by taxing consumption.
 They also argue that Americans would begin saving and investing more due to deferred
consumption. “In 2014, the Treasury collected $1.7 trillion from corporate and personal
income taxes.
 This could be replaced by a 12 percent sales tax on all private purchases,” says Peter
Morici, an economist at the University of Maryland.
 Supporters of the sales tax like Morici believe that it would stimulate production of goods
as well as economic growth in the long run.