My take on taxes, expanded

I've written on my views on government and taxes a number of times, but want to make some fine points clear.

I advocate elimination of all taxation except for a national sales tax on retail corporate sales. This follows the health of the economy directly, and people who buy more stuff pay more tax. No exemptions, deductions, no nothing. No IRS. No record-keeping for individuals and privately-held businesses. Any corporation with shareholders adds 5% of the value of their goods to the sale price, and remits it directly to a federal clearing house, which remits it back to the states in direct proportion to their populations.

I have heard criticism of this scheme as a "value-added tax", in that sales from each level of production would be taxed. That is not what I propose. The tax would only be on the final sale - for instance, a company that bought trucks for internal use would pay the tax, but a company that bought truck chassis and built bodies, then sold the completed trucks would not pay tax on the chassis, only on the final product, and the final purchaser would be paying the tax in any case. A similar scheme as found in most states now, where commercial purchasers get a letter from the state exempting them from sales taxes.

Perhaps this needs to be better defined - any corporation that sells at a retail sale a finished good collects the tax on every sale. A "finished good" is defined as anything that is usable as purchased, without needing further processing or treatment. So, sales of ores mined would be tax-free, as would iron ingots from the smelter and structural steel or bulk plumbing pipe sold to another corporation. Semi-finished items, like those truck chassis, would also be non-taxable.Crops grown would be tax-free until sold to the end consumer.

This has the effect of having all taxes paid by the people or corporations actually using the end products. "Rich" people would presumably buy a lot more and higher priced goods than the "poor", so there is a "progressive" effect for those who think the "rich" should pay their "fair share". The actual tax rate would be fixed and extremely difficult for the government to increase. I'm still thinking 5% would be enough for all levels of government in a truly civilized nation, with half reverting to the states in proportion to population, and half remaining to provide the functions the federal government is legally allowed to perform by the Constitution.


What am I missing? I want to reduce government to its' legal limits, and remove governmental intrusions into the lives of the people. Corporations are not persons, and have no right of privacy - indeed, to have their accounting open for all to see might reduce the possibility of corporate crimes such as Enron in the future. I see no possibility of this causing problems in research and development or trade secrets, since the only data collected would be gross retail sales.

Enforcement. Laws without penalties for violation are worthless. I propose that any corporation found to be cheating on this tax be fined 100% of their sales for the period of misreporting.

What motive remains for anyone to misstate sales so as to reduce the amount they pay? The seller does not have any costs related to taxes past adding 5% to the sales price of an item and putting that 5% into a special account for the tax payment. It's got to be an order of magnitude or three cheaper than having the small army of tax lawyers and accountants on staff that is required under today's tax codes.

If this makes sense, let me know. If I'm completely off the rails, or just need to make some course corrections, likewise, let me know.