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

I would like to begin this round by respond to three counters that Rezamee made in the previous round. For counter C1, government cannot affect income inequality unless it started to change the American economy to full blown communism. Market forces determine how much people earn in terms of their income. In this case, market forces are the demand for skilled labor (i.e., college educated professionals) and cost of services rendered. By taxing the rich more, the government is not affecting income inequality because it is not changing the income that rich people earn as the result of market forces. Higher taxation essentially represents a futile government attempt to curb market forces. Since tax rates are an economic condition, the market will adjust so that rich people make enough money that their after-tax income represents their true value in the market. In finishing my rebuttal to this counter, government taxation should not be used as a means to keep anyone from earning more after-tax income than someone else. The tax code should create an environment where everyone can improve their position in the market regardless of their income. Four hundred dollars might seem like a miniscule amount to a rich person; however, to a middle class worker or family, the 400 dollars they would save is a bonanza that would enable them to improve their economic condition. If government was truly interested in helping people, it should not try to affect the income inequality gap, but create a tax code where everyone could keep more of their earnings. In response to counter C2, there would be no budget crisis. As I pointed out in Round 2, Paragraph 4, the CBO estimates that federal subsidies cost the government a trillion dollars each year. About 90% of these subsidies are tax credits. Consequently, they would be eliminated under the abolishment of the current tax code. This would pretty much offset the effects of the new tax code. If more budget cuts were needed, Congress could look at eliminating duplicate programs, which the CBO estimates cost us about $400 billion per year. Further cuts could be made to Medicare or Medicaid as those programs have essentially been replaced by the Affordable Care Act, but this should be a last resort. Defense spending and federal works as a whole would be largely untouched by these cuts. In response to counter C3, you said the following: "Also you fail to realize that a National Sales Tax wont apply to all transactions making it more of a burden than an omnipotent solution. For example, a NST will only be applied to business to household purchases, there won"t be taxes on business to business purchases" (Rezamee, Round 2, Paragraph 7). A true National Sales tax will do the same thing that every new tax law does. It will affect accounting principles. Accountants will be required to report business to business purchases as sales even if they were not retail transactions. Consequently, every exchange of goods or services for currency would be viewed as a sales transaction. In this manner, the National Sales tax would both make up for the government"s lost revenue and ensure that consumers do not bear the brunt of the tax. However, how does this affect the price of goods? By abolishing the corporate income tax and the other taxes that apply to business, these organizations essentially become consumers in the market. The initial reaction of the market will result in a slight price increase. However, businesses will find that their costs are less and prices will quickly sink back or below their original levels. The money that organizations save from the corporate income tax will amply cover the sales tax on their business to business transactions and the more stable tax system will encourage stakeholders to invest more to expand their organizations. I would like to thank you again for another interesting round. You are definitely making me think my position through more than I ever have before. I look forward to hearing your response.