WE HAVE already noted the strong trend toward business taxation in the federal tax system and have recommended that the trend be reversed. This poses sharply the question of alternatives: What kind of revenue system should we establish? Our recommendations point in the direction of a more personal tax system. It would be possible, however, to move in the opposite direction toward an impersonal, indirect, consumption-tax system. If this were the goal, the proper procedure would probably be to retain business taxes but to broaden their base. Instead of using net income as the base of the business tax, we could use net operating income (interest not deductible), or "value added," or gross income. Perhaps eventually we would arrive at retail sales taxation as the mainstay of federal revenues.
Consumption taxes, like many other kinds of taxation, assume various forms. General consumption or sales taxes can be levied at any one of the several stages of production; they are usually applied at the manufacturing, wholesaling, or retailing levels. The retail sales tax has received most recent attention. A manufacturers' sales tax and a wholesalers' tax are regarded as considerably easier to administer than a retail sales tax, but they are less personal in their impact and less certain as to incidence and effects. The retail sales tax can be so applied as to give the consumer specific information on the amount of tax he is paying. The closer to the consumer the levy is applied, the less likely is pyramiding of prices (adding more than the tax).
Special excises differ from general consumption taxes in