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Justification for a National Sales Tax
Using a National Sales Tax to control inflation
The highest priority task for fixing the economy is to change the way we fight inflation. We need a national sales tax where the rate for any given product class can be changed rapidly without Congressional action. The Federal Reserve should have the authority to modify national sales tax rates within a range (0 to 10%) at will. Objective: manage inflation to tame the business cycle.
We can add a National Sales Tax without increasing the cost of local products to the consumer by reducing the business tax at the same time. The government receives the same income and the cost of the products remains the same since the business tax was already included in the cost of the product.
If the money collected is returned to the central bank and not spent, inflation is reduced because money is removed from the economy without adversely affecting either employment or increasing the cost to business for further investment in productivity improvements.
The better way to fight inflation is to automate control of the money supply with a National Sales Tax which can be changed at will by product class. This method has several advantages. It can be directed at the product class which is experiencing inflation without reducing demand for other products. It can be applied very rapidly (over night). It can be totally automated so that no elected officials would apply politically motivated bias to the process. It does not rely on reducing the employment rate to gain the desired affect. It also allows the interest rate to main low so that the consumer gets maximum benefit from their labor.
Using a National Sales Tax to moderate Global Trade
In a global economy, taxing business is harmful to local employment. We need to greatly reduce the business tax rate and replace the lost revenue with a national sales tax. That will level the playing field by taxing both foreign and domestic businesses at the same rate. Health care should not be a local only business expense. Health care should be funded by the individual, with lower income workers subsidized by the national sales tax which puts the burden on foreign made as well as domestic products. The price of the domestic products will not increase because both the business tax and the health care costs are already included in domestic products but not the foreign products.
Implementation of a National Sales Tax
The National Sales Tax would have two components: The Base tax rate set by Congress to offset the federal revenue last by reducing the federal Business Income Tax and a variable component changed at will within a defined range, on a product class, by the Federal Reserve System to fight inflation.