Posted on 04/22/2003 10:40:02 AM PDT by sheltonmac
There is an important distinction to be made concerning a "national sales tax" as proposed to replace current taxation, and the method of taxing consumption as intended by the Founding Fathers. A national sales tax would give Congress an across the board percentage of our economy by laying an internal tax, whether such revenue is needed or not. The Founder's method of taxing consumption began with an external tax on imports at our water's edge, and was extended to reach internal consumption only if external taxation were found insufficient.
It is important to study our nation's first revenue raising Act to understand the wisdom of the Framers. The Act was "... in a certain sense a second Declaration of independence; and by a coincidence which could not have been more striking or significant, it was approved by President Washington on the fourth day of July, 1789." [See, Twenty Years of Congress, James G. Blaine, 1884, Vol. 1, page 185]
Madison, in discussing this Act before Congress, clearly pointed out a very important principal of American's original tax reform package:
"...a national revenue must be obtained; but the system must be such a one, that, while it secures the object of revenue it shall not be oppressive to our constituents."
The Act imposed taxes, not on American constituents, but on "goods wares and merchandise" imported into our Country by foreign nations, and not one dime was raised under the Act by any internal taxes. Internal taxes were frowned upon by the Founder's especially when a national revenue could be had by requiring foreign nations to pay for the privilege of doing business on American's soil!
Jefferson, in his Second Annual Message (December 15, 1802) states:
"In the department of finance it is with pleasure I inform you that the receipts of external duties for the last twelve months have exceeded those of any former year, and that the ratio of increase has been also greater than usual. This has enabled us to answer all the regular exigencies of government, to pay from the treasury in one year upward of eight millions of dollars, principal and interest, of the public debt, exclusive of upward of one million paid by the sale of bank stock, and making in the whole a reduction of nearly five millions and a half of principal; and to have now in the treasury four millions and a half of dollars, which are in a course of application to a further discharge of debt and current demands."
Imagine...all this in consequence of "external duties!"
In Jefferson's Second Inaugural Address (March 4, 1805), he points out:
"At home, fellow citizens, you best know whether we have done well or ill. The suppression of unnecessary offices, of useless establishments and expenses, enabled us to discontinue our internal taxes. These covering our land with officers, and opening our doors to their intrusions, had already begun that process of domiciliary vexation which, once entered, is scarcely to be restrained from reaching successively every article of produce and property. If among these taxes some minor ones fell which had not been inconvenient, it was because their amount would not have paid the officers who collected them, and because, if they had any merit, the state authorities might adopt them, instead of others less approved."
"The remaining revenue on the consumption of foreign articles, is paid cheerfully by those who can afford to add foreign luxuries to domestic comforts, being collected on our seaboards and frontiers only, and incorporated with the transactions of our mercantile citizens, it may be the pleasure and pride of an American to ask, "what farmer, what mechanic, what laborer, ever sees a tax-gatherer of the United States?"
The national sales tax idea would do ill to our nation as it is an internal system of taxation which ultimately increases the cost of goods manufactured on American soil; burdens the American Citizen in its collection; and, is to be paid BY the farmer, mechanic, laborer, etc. who will continue to see the intrusion of the "tax gatherer of the United States" if such a system is adopted!
It is also important to note how imposts and duties (external taxation) were successfully used to encourage domestic manufacturing and assist in building a strong industrial base. The first revenue raising Act imposed an across-the-board tax on imports which was higher for imports shipped in foreign owned foreign built vessels, and discounted the tax for imports arriving in American owned American built ships:
"a discount of ten percent on all duties imposed by this Act shall be allowed on such goods, wares, and merchandise as shall be imported in vessels built in the United States, and wholly the property of a citizen or citizens thereof."
This skillful use of external taxation gave American ship builders a hometown advantage and predictably resulted in America's merchant marine becoming the most powerful on the face of the planet. In addition, our national treasury was filled by foreigners paying for the privilege of doing business on American soil.
But this was when members of Congress, and those running for Office, put American interests first and would have considered NAFTA, GATT and the WTO as acts of sedition, and would have tarred and feathered those promoting such surrender of America's sovereignty.
A national sales tax plan which omits external taxation as a principal source to fill our national treasury, is in fact a surrender of national sovereignty to the advantage of foreign interests!
It is quite obvious the American People are fed up with the manner in which Congress now raises its revenue, and the system will be changed...one way or another. But if income taxation is abandoned and the Founders original tax plan is returned to, including the use of impost and duties at our water's edge as a principal means to fill our national treasury, a powerful group of international financiers and investors will have their gravy train cut off. Perhaps that is why a flat tax along with a national sales tax has been offered as "tax reform" by the establishment ... each proposal cleverly perpetuates a burdensome system of internal taxation as the principal means to raise revenue, and leaves the international gravy train in tact by not resorting to external taxation to meet the expenses of Congress as was intended by the Founders!
In closing, many of the same people who promoted the NAFTA, GATT and the WTO (the free trade crowd) are now promoting various forms of tax reform ... each proposal cleverly maintaining internal taxation as a principal means to raise a national revenue. Let us continually keep in mind the important distinction between internal and external taxation while working toward the elimination of income taxation and strive to return to the Founding Father's original tax reform package which provided the means allowing America to become the economic envy of the world.
This argument falls flat on its face when compared to the current situation.
Anything produced domestically is federally taxed multiples of times. Any foreign goods, unless there's a tariff or excise tax on them, aren't federally taxed AT ALL.
Under a national retail sales tax, domestic goods would be taxed ONCE, at the point of sale, as would foreign goods. The price of domestic goods would fall dramatically, and the price of foreign goods would rise.
The author is silly.
My way of doing it would phase out the other taxes, and require the receipt to enumerate the sales tax as a specific line item.
That would leave ONE tax line item, and Joe Citizen suddenly notices that he's paying 35% on every transaction. Gasoline would cost a s**tload less, IF the sales tax went down. Food would cost a s**tload less, IF the sales tax went down.
Eliminating withholding by itself would swing a lot of folks to the smaller government; I don't think you'd need a flat tax per se to do that.
I'd also move tax day to the day prior to election day.
And a NRST won't change that, so why bring up such a strawman in the first place?
With all due respect to the Founding Fathers, this is a lot of crap. One of the first acts of the U.S. government was an excise tax on distilled spirits in 1791, a move that eventually led to the Whiskey Rebellion in 1794. It seems that we have nothing to complain about these days when it comes to the "unconstitutional" expansion of the Federal government -- the United States "as we knew it" only lasted for about two years before all the nonsense began.
A sales tax *is* a VAT.
I have found sales tax proponents to have the least amount of economic knowledge of any group.
But wouldn't employers still report employees' income to the Feds under a sales tax?
Why would they?
First of all, your examples are not the underground economy. When a drug dealer buys a Ziploc bag, SC Johnson and Co. along with its employees pays income tax on the sale.
A sales tax does not capture the underground economy. Noone pays tax on a drug transaction. Neither the drug seller nor the drug buyer.
When the drug seller pays for other goods, such as cars, clothes, et cetera, the proceeds of his transaction get taxed at that point.
"One of the first acts of the U.S. government was an excise tax on distilled spirits in 1791..."
I believe that was a little different. If I'm not mistaken, the tax on whiskey was collected at the source rather than at the point of sale.
That is true regardless of whether we have a sales tax or an income tax.
You are describing a transaction in the legitimate economy. Transactions in the underground economy such as drug deals don't get taxed by either a sales tax or an income tax.
(Under the NRST) The price of domestic goods would fall dramatically, and the price of foreign goods would rise.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.