Cancel 2016.2
The Almighty
1: The flat tax would be applied to ALL income, regardless of source (with a few exceptions, such as inheritance of a family farm and things like that). It would also apply to all American citizens, regardless of where they choose to live. Foreign investments: if you own them, if you are an American citizen, and if they increased in value over the tax year, the increased value is taxed. Period. The only recourse for the uber rich to avoid paying taxes would be to move out and renounce their citizenship.
2: A business already balances revenues with respect to expenses, and claims the difference as profit, which is taxable. Taxing their expenses (which is what a sales tax would do) simply increases their expenses, which is then passed on to the consumer, resulting once again in the consumer - most of whom are middle class - paying the business's taxes anyway. Except they'd be paying a lot more than they pay now. The typical business has around 15% profit margin. So they pay taxes on 15% of their total revenues (which they also pass on to the consumer). A sales tax would have them paying taxes on 85% of their revenues. Not profits mind you, which is income, but revenues - total sales. This would result is an increase of around 13% in consumer prices, just to offset the increased costs of production from a 15% sales tax. Add to that the 15% sales tax paid directly by the consumer and you get a net 28% increase in the cost of consumer goods across the board. I highly doubt that would do much good for our economy.
(Frankly I think we should simply stop taxing the income of businesses altogether, since the costs are ultimately paid by the consumer anyway. Concentrate on taxing personal income. Businesses should be limited to fees directly attributable to the cost of their use of public facilities - which is still passed on to the consumer, but far lower rates than the consumer currently pays for.)
3: WTF is with this concern over taxing ILLEGAL transactions? Of all the ideas, the idea of a desire to tax illegally derived income has to be the farthest out from reality I have ever seen. First, get rid of most drug laws (they almost invariably cause more harm than good anyway), and that'll put dealers' income in the legitimate realm where it can be taxed normally.
4: No matter what tax laws are written, there will be ways around it that some people will use to avoid paying. I know a guy in CA, where sales taxes are high, who never buys new if he can avoid it. He buys used from the private market. He reads classified ads almost religiously, and is an avid eBayer. He buys his computers used, used cars (from individuals, not dealers), used TVs, refrigerators, etc. etc. etc. Claims he saves a couple thousand in sales taxes every year doing that.
How many road-side produce stands do you think claim every cent of produce they sell? And then there are the black markets on things like tobacco products, to avoid the punitive taxes placed on them. Some people will always cheat on their taxes - even sales taxes.
Bottom line is a national sales tax will do far more harm than good, will (as usual) hit middle income brackets hardest, and will have a devastating effect of business and consumer prices.
I agree with you on the corporate side. I would eliminate it as well. The whole concept of 'taxing the evilz corporations' is ridiculous. As you stated, it is just another way to tax consumers in a very hidden way.
If you tax salary, dividends and capital gains, the money will end up taxed.