Chapter 16: Business and Tax Policy

Business acts as the major tax collector for government, directly paying the taxes on business sales and earning and withholding and transmitting the great bulk of the income and wmpolyment taxes on individuals.  
The four approaches to tax reform analyzed in this chapter - the flat tax, the USA tax, the national sales tax, and the value-added tax -are all variations on the same theme.

• The flat tax is the simplest of the top-down reforms of the federal income tax. Its critics are concerned with the potential capital losses to homeowners and investors in state and local bonds that would arise from the absence of transition rules.
• The USA tax, in contrast, maintains the progressive nature of the current federal tax system while shifting the tax base from income to consumption.
• The national sales tax is the simpler of the bottom=up tax reforms. For most individual taxpayers, it would eliminate the need for dealing with the internal revenue Service.
• The value-added tax, well-known around the world, is the most sophisticated salesbased revenue approach.

Some tax analysts believe that some combination of the four approaches to consumption taxation is likely to emerge. One of the continuing shortcomings of tax policy is that, like other areas of government, decisions tend to be made in isolation, ignoring the impacts of other governmental policies.
The four approaches to tax reform analyzed in this chapter- the flat tax, the USA tax, the national sale tax, and the value-added tax - are all varications on the same theme. All would shift the base of federal taxation from income to consumption and also simplify the process of complying with federal tax law.

Source: Business and Government in the Global Marketplace (7 edition, Murray L. Weidenbaum)