Edward Gonzalez, state congressional candidate in San Jose, proposes a single national sales tax he claims would simply our current economic system and help alleviate one of the problems with illegal aliens. That’s the solution offered by Edward Gonzalez, Republican candidate for California’s 16th Congressional District in San Jose. I visited his website to read his views, and this was by far the most interesting concept he described. Gonzalez claims that his goal is: “A simple tax system that allows all individuals to see on a regular basis exactly how much government is costing.”
Gonzalez asserts that “The adoption of a single national sales tax would involve abolishing all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes.” He advocates something in the amount of a 40% tax on all commodities and services, which he estimates we already pay in various forms, and is what the government needs (or uses) to operate. More importantly, one tax would make transparent exactly what our government is costing each year. This is somewhat similar to the Value Added Tax (VAT) system of Great Britain.
As to illegal aliens (not necessarily immigrants), he advocates that we immediately grant foreign worker status to all current illegals “under the condition that American citizens could go to those countries to work or start businesses”; I don’t think that will ever happen. Those workers would then be bearing the same tax burden as citizens, and “Those parasites that came just to take advantage of free programs will leave or get a job”.
While I certainly see several merits to this solution as opposed to the “flat tax” idea that’s been around for decades, I also see several problems. First, it’s like the ridiculous ADA system used in public schools, where the state collects all property taxes and redistributes them back to the school districts. I don’t see how there is going to be a “fair” system of distributing the appropriate portion back to each state, not to mention what percentage of the gross the feds will decide to give back in the first place. Those are huge problems with our current school budget system.
The reason VAT works in Britain is because it has a strong central government, not having to worry about state rights or interstate commerce and taxation, and a lot of their industry is still nationalized. The U.S. is a mishmash of small to large jurisdictions, each wanting to levy certain taxes to fund their own desired agendas. Does this single sales tax also eliminate local sales taxes and bonds passed by the citizens to fund their local programs?
It also seems to me that corporations would love this, as most already own their property and capital equipment and would only be paying taxes on new purchases. I suppose Mr. Gonzalez believes this would be offset by the highly paid executives having to pay their taxes, but I could just imagine a new structure where executive salaries drop dramatically and the corporations suddenly start “subsidizing” every single expense, from housing to cars to “meal allowances”.
Then we get into the “rich vs. poor” disparity. If the wealthy people don’t have write offs on their mortgage, they’ll simply buy a property cash (or pay it off as quickly as possible) and take the immediate hit on the taxes. The middle class will still look for a 30-year mortgage, absorbing the interest as well as that 40% tax, and the poor will continually be paying rent, which landlords will increase to amortize their tax burden on the property. Few people will every be able to afford a house.
Not being an economist, perhaps I am blowing these pitfalls out of proportion. However, I see a potential for some sort of combination of flat income tax (especially corporate) and increased local sales taxes to simplify the system and provide a little more equity, which might come closer to achieving the desired ends of Mr. Gonzalez. The flat income tax would be federal, the sales taxes local.
What struck me the most about this proposal, however, is that at least Mr. Gonzalez has really studied the economic problem and has a solution, unlike his opponent and most other politicians. Showing a true understanding of issues and proposing specific solutions makes him, in my opinion, miles ahead of most empty-promise bureaucrats.