Replacing the Current Tax Code With A National Sales Tax Will Reboot the American Economy

The first thing I would like to address is Rezamee"s Counter 4 from Round 3 that I was unable to respond to last round because I ran out of time. The simple truth of my position that prices would drop comes from the economic principle of inputs and outputs. A corporation is a separate legal entity owned by shareholders who must invest capitol in its operations in order to sustain it. Rezamee maintains that most corporations do not pay taxes. However, he neglects to identify the reason why these loopholes exist in the tax code: "double taxation". If these loopholes did not exist in the tax code, the corporation"s income would be taxed twice: by the corporate income tax and by the individual income tax (http://www.investopedia.com...). While these loopholes do allow corporations to escape paying taxes, their shareholders still must pay taxes on their income from the corporation. This drastically affects inputs since the corporation requires capital to finance its operations. That capital can come from a number of places, but the primary source must be the reinvestment of earnings from shareholders. If their earnings are taxed, shareholders have less to reinvest in the corporation, limiting the possibilities for its expansion. Consequently, corporations must charge higher prices in order to generate more revenue to expand. A National Sales Tax will shift the tax burden from income, which directly affects inputs, to the outputs of each individual step (also known as cascading, explained in my round 4 submission). Because the tax burden is more balanced, shareholders are empowered to increase their inputs to expand the organization. The increased inputs from shareholders will result in the corporation being able to give them a higher rate of return while lowering prices for consumers. According to the law of demand, "The most famous law in economics, and the one economists are most sure of, is the law of demand. On this law is built almost the whole edifice of economics. The law of demand states that when the price of a good rises, the amount demanded falls, and when the price falls, the amount demanded rises" (http://www.econlib.org...). When one examines a supply and a demand curve, there are clear equilibrium points where the increased production becomes less profitable. However, this is more of the market protecting itself against product saturation and telling the corporation to pursue another endeavor in addition to its normal activities. In summary, the Sales Tax enables corporations to increase inputs, which directly affect its outputs. In response to Rezamee"s Counter 2, Round 4, I will begin by saying no offense taken by your comment on my job. I brought it into the discussion so it was open for criticism. I work a sales job where I earn $10 an hour for 40 hours per week and my commissions are paid every 2 weeks about a month after I earn them. They can be pretty inconsistent so I only mentioned my consistent income since that is how I must budget my expenses. As for the rest of Rezamee"s counter, I am sorry if the discussion trended toward income inequality instead of wealth inequality. I could only debate on the terms he brought into the discussion: "C1: You state that the government can't affect income inequality, this is completely absurd. It's quite simple, with the current tax code, rich people create less capitol than with the NST (National Sales Tax), while a person on the bottom of the chain could save around 400 dollars if an 13% NST took place. It's quite obvious to see the income inequality, rich people would save thousands upon thousands while your average minimum wage worker would save 400 dollars. In summary, the gap would be even larger and tax revenues would shrink" (Rezamee, Round 2, Paragraph 4). A government cannot have a positive effect on income or wealth inequality by disrupting natural market forces in order to try to narrow the gap. Instead, the government will hurt all individuals in the market, especially the middle class and the poor, by destabilizing the market. In conclusion to my response to this counter, business would not raise prices (see my explanation of the Law of Demand above). The increased market activity would cause prices to drop as organizations expanded. The only situation where your claim that business would begin to raise prices would occur at the equilibrium point in the supply and demand curves (http://www.econlib.org...). However, the natural market response would be to move something more profitable as competition would become harder. In response to Rezamee"s Counter 5, Round 4, I did some research. The most recent numbers I could find on Tennessee"s budget were from 2013. In 2013, Tennessee had a $580 million surplus. For all intents and purposes, their tax code based around a state sales tax has succeeded admirably. In wrapping my debate on the topic, a National Sales Tax will bring more prosperity and stability to the American economy through its simplicity, its fairness, and the fact that it does not tax wealth creation. Every American deserves to keep more of their income regardless of whether they are rich or poor. It balances the tax burden more fairly by taxing people who are more capable of paying it. The initial effect of the policy implementation may cause a temporary spike in prices, but it will result in lower prices as shareholders and small businesses find out that they can invest more in their operations instead of budgeting for a tax on their income and half a dozen other things. The increase in take home pay will enable Americans to handle the temporary spike in prices and will position them well for the market explosion when the prices drop. For a closing statement on the debate, I would like to commend Rezamee for providing thought provoking contributions and arguments to this debate. I would also like to thank him for maintain a civil debate even though we seemed to have several misunderstandings on our relative positions. Thank you all for listening and I hope to hear some feedback about my debate performance and what I could do to improve in the comments.