How Should Americans Be Taxed?

The GOP Convention doesn't even start tommorow, but Matt Drudge suggests that it already features something totally absent last week from Boston, Massachussetts. President Bush actually intends to introduce a major idea. Drudge had everything except the cheesy siren up for this one. His text follows below.

REPUBLICANS PLAN PUSH FOR ELIMINATION OF IRS**Exclusive**A domestic centerpiece of the Bush/GOP agenda for a second Bush term is getting rid of the Internal Revenue Service, the DRUDGE REPORT has learned.The Speaker of the House will push for replacing the nation's current tax system with a national sales tax or a value added tax, Hill sources tell DRUDGE.

President Bush almost behaves like he's the challenger. It reminds me of 1992, when Bill Clinton dominated the experimental policy arena with his Welfare Reform proposal. The President's haymaker; scrapping the IRS and replacing it with a different system of revenue generation.

Steve Forbes used this issue to remain alive for a primary or two during his attempts to win the GOP nomination. His pet proposal was the Flat Tax. This proposal is often derided as non-progressive and simplistic. However, Paul Bremer didn't think so when he needed a tax system in Iraq. Vladamir Putin has adopted a flat tax in Russia as well.

Another possible taxation system involving a VAT or Value Added Tax, taxes consumption of goods and services. The VAT is already used in many other countries around the world and by the European Union. It works by taxing the value added in each stage of production for a good or service. Wikipedia offers an explanation by way of example below.

Adding on a 10% VAT:
The manufacturer pays $1.10 for the raw materials, and the seller of the raw materials pays the government $0.10.
The manufacturer charges the retailer $1.32 and pays the government $0.02 ($0.12 minus $0.10), leaving the same profit of $0.20.
The retailer charges the consumer $1.65 and pays the government $0.03 ($0.15 minus $0.12), leaving the same profit of $0.30.

A final alternative President Bush may attempt is a National Sales Tax. It's supporters claim that it would eliminate hidden and unfair taxation and improve the competitive status of American Products abroad. Its detractors refer to it as a tax on the poor, but have seemingly lodged a laundry-list of gripes without any real evidence to back them.

Whether President Bush actually carries through on this initiative is almost secondary. It will develop a life of its own. The American people have a strong sense that the current regime of taxation is unfair and needs strong revision. By putting this on the table in a major way, President Bush has the potential to actually turn this year's election into a legitimate contest of ideas. Three cheers for the Commander-In-Chief.

LGF is also blogging this and Wizbang says that it fits in with President Bush's willingness to take policy risks.

Update I: Not all bloggers are as optimistic as I on this one.