Saturday, December 25, 2021

On Modern America’s Tax System – Sales Tax

On Modern America’s Tax System – Sales Tax

Beizhan Liu

The United States is the most developed country in the world today. The United States not only creates and owns the most advanced technologies in the world, but also has the most developed financial and financial service system in the world. The US tax system is also very representative. However, many years ago, during my interactions with Americans, I suddenly discovered that the sales tax [1] [2] in the US tax system seems to be very imperfect, neither unified nor comprehensive. To improve the U.S. tax system and modernize the U.S. tax system, it is necessary to reform sales tax and establish a unified and comprehensive sales tax.

The tax system was originated from ancient Egypt in 3000-2800 B.C.[3] . The establishment of the tax system is to maintain the operation of a government. The earliest use of sales tax was in the ancient Greek port city of Piraeus in 415 B.C.[4] . In the United States, West Virginia was the first state to install sales tax. In 1933, 11 states followed and began to install sales tax. In 1940, a total of 18 states adopted sales tax [5]. Currently (as of 2017), a total of 45 states in the United States, as well as the District of Columbia, Puerto Rico and Guam, have adopted sales tax, and 5 states (Alaska, Delaware, Montana, New Hampshire and Oregon) have not yet installed sales tax. Sales tax is levied by the state government, and the federal government has not yet levied a sales tax [6].

From an international point of view, currently there are about 179 countries that have adopted sales tax [7], which means that most countries have adopted sales tax. Canada’s sales tax is unified (HST), that is, the federal sales tax and the provincial sales tax are unified, which is equivalent to only one tax [8]. The Australian federal government collects a sales tax (GST) and distributes it to the states, but the state government also partially collects similar stamp tax [9].

The improvement of the US tax system firstly lies in the federal government adopting and levying sales tax. In the case of consensus, it can be unified with the sales tax of each state, like Canada, and become a unified sales tax. The scope of the levy can be comprehensive and all-round, with the exception of basic dietary goods and services.

The adoption of sales taxes by the US federal government is not just a matter that is in line with international taxation practices. It is a project to perfect the main beam of the house. Theoretically speaking, a country's taxation mainly lies in three aspects: income tax, social security tax, sales tax, and then other taxes. Sales tax has extensiveness and apportionment (individual, time). For a single taxpayer, sales tax will not bring great economic burdens, let alone bring impulse economic burdens. For the federal government, due to its extensiveness, it can bring huge tax revenues. Because of this, most countries in the world adopted sales tax.

The implementation of sales tax by the America federal government has the following great significance:

• The implementation of federal sales tax in the United States is one of the most important measures for the modernization of the US tax system;

• The implementation of federal sales tax in the United States is a main beam project of the U.S. tax system;

• The unification of the US federal sales tax with the state sales tax will simplify the US tax system;

• The implementation of the U.S. federal sales tax will bring huge tax revenue to the U.S. federal government. For example, if the U.S. federal government levies a 5% sales tax, it will bring about 642.85 billion U.S. dollars in revenue to the U.S. federal government every year (according to relevant data calculation [10]);

• The implementation of the US federal sales tax will help to eliminate the federal fiscal deficit at an early date and improve the government's financial performance;

• The implementation of the US federal sales tax will bring sufficient financial support to the improvement of the infrastructure and people's livelihood in the United States.

The improvement of the U.S. tax system, that is, the modernization of the U.S. tax system, must first concern the implementation of the federal sales tax. This is not only a requirement of taxation theory, but also a need of reality in the United States. Of course, the improvement of the U.S. tax system is not just this, there are more aspects which need to be researched and developed by theory researchers and industry practitioners. I also expect more experts to support my point of view.

(Beizhan Liu,a Canadian entrepreneur, inventor and economist; revised on 2021-10-17)


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