"You realize that the Subchapter S businesses will grow dramatically?"
Subchapter S is named after the section of the Internal Revenue Code that establishes them. When the Internal Revenue Code is repealed, there won't be any such thing as a Subchapter S corporation.
"Subchapter S is named after the section of the Internal Revenue Code that establishes them. When the Internal Revenue Code is repealed, there won't be any such thing as a Subchapter S corporation."
Irrespective of the above answer, which is technically correct, the larger point is that there is an opportunity for fraud and abuse with respect to personal consumption items being channeled through companies as tax exempt purchases. This is something that will have to be monitored. It is certainly fair to say that a sales tax will present a different set of compliance challenges than an income tax has.
However, it is not at all accurate to say that compliance will be more difficult than with the current system. When you consider just the fact that illegals will be paying taxes at a disproportionate rate to the rest of us, that will go a long way toward improving the overall allocation of the burden. A recent study by Bear Stearns indicated that the underground economy, expecially illegal immigrants, may be twice as much as previous estimates.
The designation "Subchapter S" may go away, but the function doesn't. These one-man "corporations" will increase dramatically to get the tax-exempt status.
(Send an auditor to prove that I didn't purchase 3000 gallons of gas last year for business purposes -- thereby saving around $2000 in taxes.)