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I love the idea of a national sales tax. I think that people aren't really aware of how much money the government is stealing from them with each paycheck. I mean, think about how excited we get when we get a 'tax-refund'. That is our own money coming back to us, and we are happy about it?!?! Paying the money out in a sales tax would make you very aware of what taxes were doing to the cost of buying goods. My favorite reason to support this method of taxation is that it is something that you can avoid participating in to a certain extent. It encourages self-reliance, self-sacrifice, long-term savings, etc. You won't be taxed on food from your garden. You won't be taxed on the car you already own. Under the current income tax system, you are taxed no matter what you do with your money after you get paid. Move the tax toward discretionary spending and I think that there would be less wasteful spending.
It might lead to less consumption of things that we really don't need anyway. There was an author I saw interviewed recently that suggested that we have, as a nation, shifted from manufacturing goods and services to manufacturing the desire for goods and services. His point was highlighted by the marketing of bottled water. Here, in America, we have a regular supply of clean, potable water. At the same time, we have truly massive consumption of bottled water for no real reason. The author was suggesting that this kind of system cannot persist.
I would advocate that nothing be excluded from the national sales tax with the possible exception of the purchase of a home under a certain dollar amount. This would help to make up for the largest standarized deduction that most people take on their mortgage interest. But, yes, tax just about everything. After all, almost all of what we buy now is bought with after tax dollars. Do you get to budget away your salary to buy groceries on a pre-tax basis? Some people use a pre-tax account to budget for health and child-care expenses, so that might require a shift in thinking.
One of the un-intended consequences of a national sales-tax would be an upswing in the number of second-hand transactions from person to person. I'm thinking of craigslist and local classifieds for buying and selling. Yes, you are supposed to file and pay sales taxes on those transactions yourself as the system specifies, but just about no one does it in reality. Bartering for goods and services might also see an increase. I personally think that either of those is a very good thing. Not for businesses maybe, and not for the government, but good for the individual and good for the community. Buying things second hand is a form of recycling and both parties benefit financially as well. Bartering is a whole other can of worms that I won't open here.
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You do not really understand something unless you can explain it to your grandmother.
- Albert Einstein
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