By now you have heard of "inversion" where an American company buys a foreign company located in a country with low corporate taxes. Then they actually make the foreign company the parent so that they can funnel profits to the low tax country, thereby avoiding the higher US tax rate.

Also, there are foreign manufacturers who sell their goods in the US, and all the profits on the manufacturing process stay in the country of origin. The US can only tax the profits at the retail end, where margins are often relatively low. For example, auto manufacturers will build parts in a foreign country and sell them at a high price to the US affiliate where they are assembled into a car. The car is sold at a small profit in the US, but the parts generated a high profit for the foreign parent company. Again, there is little for the US to tax since we tax only the net profits earned in the US.

Given these tax avoidance activities, what would be the impact of instituting a national sales tax and lowering the corporate tax. This way the US would get tax revenue on all of the goods manufactured in foreign countries, the incentive for inversion would be reduced or eliminated, and the cost of manufacturing things in the US would go down.

The argument against an increased sales tax is that it tends to be regressive and may hit lower income families harder. What do you think? What impact will an increase in sale tax have on investment in the U.S. and why?