SUMMARY: ELIMINATES THE IRS
A completely new kind of federal tax is being proposed by Indiana Senator Richard Lugar that would radically change the way you and I pay taxes. This proposal is a retail sales tax and would eliminate the federal income tax and all the withholdings, exemptions and paperwork that go with it. Instead it would adopt a national sales tax much like state sales taxes already in use across the country. Consumers would pay the tax whenever they make a retail purchase. Excluding food and medical supplies is under debate; current proposals include these as taxable items. The national sales tax rate is proposed initially at 17%. The overall strategy is... instead of taxing what people earn, the government would tax what people spend to encourage savings and investment.
Advantages: NATIONAL SALES TAX
It would eliminate the income tax.
There would be no tax forms for citizens to fill out.
It would eliminate the need for the IRS. Tax revenues could be handled by the Treasury.
It would be administered just like current state sales taxes.
All taxes would be collected by retail businesses as they sell goods and services.
It would be very compatible with ever increasing electronic transactions like credit cards etc.
It would tax all citizens at the same rate so that only those who spent more would pay more taxes.
It would encourage savings and investment.
It completely eliminates the ability of political groups to interfere with economic issues of taxation for special political interests.
It would save the country an estimated $600 billion a year spent in complicated tax compliance.
It would collect taxes from everyone living in this country, including aliens and illegal aliens- adding billions of dollars to the nation's treasury.
It would tax the underground cash economy in the U.S. because people who currently evade taxes would be taxed equally when they bought goods and services.
Analysts say it could dramatically increase the tax revenue collected while reducing the impact on individual citizens.
The cost of compliance is estimated at only $1-5 billion per year for businesses, as much as 500 times less than the current system. However there is no cost of compliance for consumers.
Disadvantages:
It would place a greater burden on businesses, especially retail sales, to collect and be liable for the taxes.
Food and medicine are not exempt from sales taxes, having some impact on the poor and elderly.
The plan has been upgraded and expanded upon since then. go to http://www.fairtax.org