Thoughts about a national sales tax

The Drudge Report is reporting that Dennis Hastert's new book reveals that some form of national sales tax, value added tax, or flat tax will be a centerpiece of President Bush's second term of office. The idea behind the national sales tax or national value added tax seems to be to tax consumption instead of wealth, while the flat tax (presumably with a cost-of-living deduction only) is simply one income tax rate for one and all.

Personally, I could never understand why some conservatives seem to be obsessed with a sales tax or a value added tax. The National Retail Sales Tax Alliance has a big list of positives that would incur by replacing the national income tax with a national sales tax, but in my mind a national sales tax would have some severe drawbacks:

• First of all, as a good capitalist who believes that free markets are the best way to assign prices to goods and services, why would I want the federal government to exercise any power to manipulate price levels? As a good conservative, why should I believe that the government will restrict it's sales tax power to a single uniform tax rate on all goods and services? A Congress that can write all sorts of tax penalties and exemptions into the income tax code can just as easily do the same thing with a sales tax code.



• I bet lots of foreign countries that compete economically with the United States would love for our government to make American products slighty more expensive for consumers.



• The sixteenth amendment authorizes an income tax, not a sales tax or value added tax. If you argue that any act of selling a good or service or adding value has interstate commerce implications and thus falls under purview of the Commerce Clause, then you must explain why any act of earning income doesn't have similar interstate commerce implications (if it did, the sixteenth amendment obviously would not have been necessary).



• Inflation is defined as a general rise in the level of prices over time. A sales tax or value added tax would make all goods and services more expensive, thus causing inflation. Giving the federal government a mechanism for producing a stealth policy of sustained inflation should be anathema to all conservatives.



• We all know that the inability of the federal government to effectively tax wealth instead of income has been a key obstacle to the plans of the redistributionists. Conservatives, who on general principles are supposed to be against the forced redistribution of wealth, shouldn't be in support of proposals that make wealth a tax liability.

It seems to me that, of the viable alternatives to the current tax system, the flat tax holds the most promise. A flat tax would avoid all of the problems mentioned above, boost the economy by not penalizing success with progressive tax rates, and be resistant to increases since any increase affects everyone, not just the rich.