Time for a national sales tax?

The idea of dramatically revamping the U.S. tax system to reduce the deficit is gaining momentum. Would a federal sales tax help?

Sen. Tom Coburn (R-Okla.), a member of Obama's bipartisan debt-reduction commission, says a "flatter tax" is a more realistic goal than a national sales tax.
(Image credit: Corbis)

The debate over extending Bush-era tax cuts is energizing politicians who want to overhaul the tax system more thoroughly. President Obama's bipartisan debt-reduction commission recently said the nation needs a simpler, more efficient tax code. Another panel — at the Bipartisan Policy Center — wants to reduce income tax rates and impose a 6.5 percent federal "Debt Reduction Sales Tax." Some conservatives are even reviving the notion of replacing income tax with a retail sales tax. Would a national sales tax help battle the deficit — or merely shift more of the tax burden onto the poor? (Watch a Fox Business report about the proposal)

A sales tax could work, but it is a tough sell: "There's little doubt such a tax could raise lots of money." says Jane Sasseen at Yahoo! News. And some economists believe that, "while shoppers might not like it," a sales tax is "a better, more efficient way" to close the budget gap than raising taxes on investment income. After all, encouraging investment is key to boosting economic growth and creating jobs. Still, many conservatives and liberals alike hate the sales-tax route, so it's probably "a non-starter."

"Would a national sales tax help bring down the deficit?"

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All options must remain on the table: We have to do something to stem the "tide of red ink," says Gerald F. Seib in The Wall Street Journal. Maybe a national sales tax is "unlikely," but there are plenty of other ways to devise "a simpler system with fewer loopholes." Sen. Tom Coburn (R-Okla.), a member of Obama's debt-reduction panel, likes the sales tax idea, but "his more realistic goal is 'a flatter tax, a fairer tax,'" which "could actually impose lower tax rates while generating higher revenue, lower deficits, and a more efficient economy in return."

"Tax deal paves way for reform"

A sales tax is a "cowardly" proposal: It would punish the poor, while the super rich barely feel the pinch, says Dan Froomkin in The Huffington Post. What a "regressive and cowardly" way to bring down the deficit. Instead of debt-reduction panels, we need "a growth commission or a jobs commission." The solution is not to impose "draconian" new burdens on people who are already in "grave economic distress."

"Group Of deficit hawks calls for regressive national sales tax"

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