President Bush has been hinting at sweeping tax reforms if he is re-elected in 2004. Let's ignore for the moment how unlikely that possibility is, and instead focus discussion on the various proposed Federal tax systems, and their pros and cons.
Let's assume that an implemented system would inherantly include a budget-balancing mechanism, as it would be incredibly short-sighted not to include one (imagination, people, imagination!
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"Progressive" Income Tax
This is our current [bloated] system -- if you make more money, you pay a higher percentage of your income to the government. If you make less, you pay a smaller percentage. This leads to the wealthy essentially hiding income and investments in off-shore tax shelters, while the middle class pays their fair share and more due to the massive size of the tax code (some 49,000 pages).
National Sales Tax (aka Value Added Tax / VAT)
With this system there is no income tax, just a tax on every good and service. The tax, however, would range from 23-57% depending on whose economists you listen to. Both the CNN/Money writer and Cato Institute agree that a transition to a VAT would be followed by sharp drops in price of goods and services, so a loaf of bread would cost relatively the same before and after such a system is implemented.
"Flat" Income Tax
This is Steve Forbes's baby -- a flat 17% income tax for all. However, under Forbes's plan a family of four would not pay any income tax on the first $36,000 of their income, just on any income in excess of that. So, under this system, the lower-class family struggling to make ends meet would pay nothing to the federal government. There would also be no tax on interest, capital gains, or dividends so investment in ourselves would be greatly encouraged. This seems like the best idea to me -- it's simple, it doesn't hit the lower classes hard, and allows for substantial government cuts.