It "makes more sense" but it in no way will "simplify the tax code" or "eliminate the IRS."


First of all, for those saying that we will earn taxes from tourists, that may sound reasonable but try and find one country in the world that doesn't refund national sales tax when you leave the country. You won't find one, because it's absolute suicide from a tourism point of view.

Second, the IRS would simply tranfer from handling income and payroll tax crap to handling quarterly sales tax reports from every commercial firm in the country. You aren't saving money, it's being redistributed. And if you choose to have essential items exempted from this sales tax as Tobra mention, bam your complex tax code is back and now every store in the country needs new POS systems to handle a combination of total (state) and selective (federal) sales tax systems.

Third, in order to keep any tax revenue at all you would have to implement federal sales tax codes for internet sales. The complexity of the laws would be immense, not to mention the idea of actually tracking down internet retailers that weren't charging/submitting their sales taxes... it would get fugly.

Fourth, you would be encouraging Americans to spend money outside of the country. Why vacation in Michigan when you could vacation in Canada and get your GMT refunded when you leave?

Fifth, a flat tax system is going to drive a goodly percentage of the population below the poverty line (and decimate those who are already there). So you're either going to have to exempt them entirely, refund them annually (horrible idea) or create an entirely new welfare system.

Sixth, you're drastically adjusting the relative gains from consumption and investment, which will shift money away from goods market and into investment markets.


I don't have a solution for the tax code. But that isn't going to stop me from saying that a flat sales tax system is vastly worse than our current system.