Among other things, the NST is not high enough to replace current revenues. The NST should remain a fringe argument against the federal income tax.
The NST would replace a number of taxes levied by the federal government. Principal among them is the income tax. The income tax sprung into being with the adoption of the 16th Amendment in 1913 (McNulty and Daniel 7). The tax taxes all income, however derived. The income that is taxed is subject to certain exemptions, deductions and credits depending on the class of person involved or the activity involved. For example, there is an additional standard deduction for the elderly and the blind (McNulty and Daniel 4). Additionally, there is a greater standard deduction for married people over single people (McNulty and Daniel 3-4). The government discerns among people and activities to encourage certain social behaviors. As McNulty and Daniel put on page 23:
The income tax raises revenue, subsidizes some people or activities, encourages or discourages behavior, redistributes wealth, stimulates or stabilizes the economy, maintains federalism and tackles social problems like pollution and urban decay.
The income tax is progressive - a defining feature of the system. People fall into different tax brackets based on their income. Higher income brackets are subject to higher marginal tax rates. The end result is that higher income individuals pay on average a higher proportion of their income as tax (McNulty and Daniel 18). Progressive taxation represents a federal policy of wealth distribution of money from the wealthy to services for the rest of the populace (Posin and Tobin 18). The income tax does not discourage work. People will be motivated to work so long as their federal, state and local tax rates don't exceed 100% (McNulty and Daniel 20).
The federal income tax system is far reaching, pursues policy goals in addition to raising revenue and attempts to be fair among the classes.
The National Sales Tax Defined
The NST is a simple way to generate revenue. 45 states and the District of Columbia already take advantage of sales and use taxes. Several proposals for a national sales tax has floated in the last couple of years. This discussion reflects the national sales tax defined in H.R. 3039, sponsored by Reps. Dan Schaefer (R-Colo.) and Billy Tauzin (R-La.) (Burton and Mastromarco). The NST would replace the individual and corporate income tax, transfer taxes, and most non-trust-fund excise taxes with a single 15 percent flat-rate tax on tangible goods and services sold at the retail level (Burton and Mastromarco). The sales tax would be exempted from intermediate levels of production. The NST defined here does not replace the payroll taxes providing revenue for Social Security and Medicare. (Burton and Mastromarco).
There are a slew of items that would be taxed in addition to goods and services. Housing, financial intermediation services and government goods and services that are sold to the public would be taxed. Rent and home purchases would be taxed. Imports would be taxed. (Burton and Mastromarco).
The NST proposal attempts to deal with the otherwise regressive aspects of the tax. All people would receive a rebate of the tax equaling the tax rate times the poverty line, allowing poor people to avoid paying the tax and everyone else to afford the necessities of