T Nation

Repeal of the 16th Amendment?


The 16th Amendment reads as follows:

Essentially, this is the amendment to the Constitution that allows for all income taxes, including payroll taxes, capital gains taxes, death taxes, etc., which all fall under the heading of "income tax."

Originally, in the U.S. Constitution, Article 1, Section 8, the powers to tax are defined as follows:

In today's age, would it be possible for a successful repeal of the income tax, and a move towards only levying tariffs (duties/imposts in the original language) and sales taxes (excise taxes in the original language)? Put simply, each American would receive their entire paycheck, and would have control over the amount of taxation they received (because they control what goods they purchase). There would be certain un-taxed items, so that the lower-income families would not be forced to be taxed to survive, and, so that other families, could purchase different types of goods to give themselves a "tax cut" whenever they feel they need one. Families with more of their own money, would be more inclined to purchase higher quality products, which would have higher taxes that corresponded with them. Families looking to save money, would purchase generic brand type products, with less or no taxes. This gives the control of the money back to the people, and with families receiving their entire incomes, it would also result in more money flowing through the economy.

So what are some thoughts, could this work?


It's called the fair tax.


You basically summarized it pretty well, but instead of non-taxable items, families are sent a monthly stipend to make up for the sales tax paid on the necessities.


I guess I knew that, but forgot it at the same time.

Ok, well now that we've established I should think harder before I open my mouth (take to my keyboard?)

Would it work?


Why replace it?


If you could get about half a trillion dollars from it every year, I don't see why it wouldn't. Someone would have to do the math to figure out what the sales tax would have to be to generate such revenue. So in theory, sure.

But in practical terms, is there an appetite for something like this in the states? In Canada, while we were generating budget deficits, the progressive conservatives introduced a federal sales tax. It wasn't so popular. They went from a house majority to two seats in the next election. Yes, to two seats.

But, they also didin't lower income taxes to offset the sales tax. They were kind of in a tough spot, and made a tough decision to introduce the tax to generate more revenue and eliminate the budget deficits.

So, the questions are really: Can this form of taxation generate enough revenue, and do your elected officials have the balls for it?


I think it would be too complicated for most in this country to understand it, and with the number of people that don't actually pay income tax don't think it would be successful.

we would have to make step wise movements to the end goal.


Of course it could work, but I don't think it is the best solution. If you read through the website, it is much more complicated than it seems, and would require a whole new department to oversee it. Or just the same old IRS. The first year income would be extremely low, as people would stock up on goods before it takes effect. It would also open the door for a whole new market for used goods, thus requiring the tax to be higher than estimated.

It could easily kill some small businesses such as homebuilders, since a new home would have a sales tax. It would be hard to compete when buyers know buying a new house will cost ~20% more.

There are some other major questions I have, such as problems with distinguishing between a business and an individual, and the transparency of yearly taxes, but we'll save the intricacies of the plan for later.

Overall, I don't think it is necessary or particularly useful. It does not solve the biggest problem right now which is spending.

I think simplifying the current taxcode would be much more beneficial. Cut out most of the deductions and credits. Lower or eliminate corporate taxes, and lower capital gains taxes while eliminating the loopholes for hedge fund managers. Eliminate subsidies. Finally make the income tax flat or only slightly progressive, as in no more than a 10% difference from top to bottom.

The only deductions that I think are really necessary are those deductions for state and property taxes and for dependents. The dependents deductible is arguable.

Once that's taken care we just need to overhaul the payroll tax.

The income tax really isn't that difficult, and it is a convenient, i.e. inexpensive, way for the government to collect taxes, which is a necessity. The problem is that we have too many bureaucrats that want to take advantage of it in order to advance their own initiatives.