@Foxfyre,
Foxfyre, the system you are describing exists already, with state and local taxes. Businesses that buy products for resale, which includes farmers buying wheat seed, etc., are not taxed with sales tax. They have a tax exemption license, as a farmer or business, it exists already. I have run a business, wherein product that is purchased for resale is not taxable, because it is resold. This is a very common activity throughout the country, and it works. Now, a farmer buys wheat seed, it is not taxable, because it goes into the product that will be resold. A farmer buys a hammer, it is taxed, because he is the end user. I admit concern that the amount of abuse will spiral upward if a higher sales tax is added, such as 20% federal, but do not believe for a minute that billions of dollars are currently not being lost through abuse of the existing income tax system. There is no perfect system.
In regard to the flat tax, I have to say I do not agree with ican. If we could roll back history, perhaps it would work, but we can't. Nobody is going to accept a flat tax now. And face it, we do social engineering with the income tax, we encourage behaviors, both social and economic, with tax policy, by granting incentives or penalties to various behaviors. And we assign a greater tax burden to those people that are more able to pay it, and given the minimum wage nowadays, it would be tough to make it on minimum wage without the nice tax breaks and rebates.
I frankly think we do too much social and economic tweaking of society with tax policy, we should instead allow the market place dictate the way things go, and that is one reason I want to look at going to the sales tax system, to get away from the feds confiscating profits. And the sales tax I envision is not flat, but I am not married to the flat idea, nor do I think the constitutionality of ican's argument is valid. I normally agree with ican 90% of the time, so it pains me to disagree, but in this case I have to. I would also provide rebates or cash back to low income earners, but most importantly those same people would still pay sales tax on taxable items, which I think is important. I think it is politically healthy for every citizen to be aware of the taxes being paid, and that does not exist today.