Will a national sales tax save the U.S. economy or help it crumble?

By now, you have probably heard public officials, economists and pundits incessantly discuss income inequality. It has been the talking point for so many for so long, but most don’t really address the fundamentals of income inequality: the Federal Reserve System and the federal government.

One idea that has been purported for years now is the institution of a national sales tax, otherwise known as a value-added tax (VAT). Numerous states already have their own, but an additional consumption tax would be applied nationwide on top of a consumer’s purchase.

When it comes to problems in a country, a lot of people tend to believe the solution to all of our issues is more government, more taxation, more regulation, more bureaucracy. Indeed, these have been the very roots and facets of our problematic matters, but our esteemed intellectuals think otherwise.

In a new paper published by Reuven S. Avi-Yonah, a professor of law at Michigan State University, it is argued that a national sales tax – on top of all of the other immense taxes – would help fund the social safety nets of society and diminish income inequality.

Avi-Yonah included a chart in the study and it looked at income inequality levels of several leading economies since the end of World War II. To no one’s surprise, the U.S. had experienced an increase in income inequality and is at the bottom of most unequal developed economies. The one element that the U.S. differs from places like Canada and Germany is a countrywide sales tax.

A sales tax, Avi-Yonah argues, would bolster funding for Medicare, Social Security, food stamps and Medicaid.

gini index income disparity since world war ii

“Strengthening the social safety net is important to sustaining growth. Open economies tend to have stronger safety nets, because the gains from having an open economy tend to impose risk on the people who lose from globalization, so that a strong safety net is in a democracy a precondition to obtaining widespread political support for openness, which in turn produces growth.”

In addition, Avi-Yonah says a sales tax is more beneficial than a higher income tax because it’s very difficult to avoid paying such a consumption tax and a larger number of people would pay the tax.

What’s the primary hurdle to imposing such a tax? The people.

A Rasmussen survey found that nearly two-thirds (62 percent) of Americans oppose a national sales tax, compared to 22 percent in favor. Another 16 percent remain undecided.

During the 2012 Republican primaries, Herman Cain proposed his 9-9-9 plan, which he repeatedly promoted at every turn. This consisted of a nine percent personal income tax, a nine percent corporate tax and a nine percent national sales tax.

He suspended his campaign a few months into the primary season.

Former New Mexico Republican Governor and 2012 Libertarian presidential candidate Gary Johnson made a national sales tax the basis of his campaign. Identified as the FairTax, the tax reform proposal would eliminate all forms of taxes, including income, corporate, payroll and capital gains, and replace it with a 23 percent national consumption tax.

Johnson didn’t get very far in the election.

Instead of taking more money from citizens through force, why can’t it cut spending, find efficiencies, end the wars and balance the budget? It’s because of these very ideas from our esteemed intellectuals and officials that lead a nation to ruin.

If Cain’s plan was implemented, why wouldn’t the government increase that nine percent to 15 percent in five years or 20 percent in 10 years? No, the government should replace the income tax with absolutely nothing, zero, zilch, nada.

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