Skip to comments.A National Sales Tax
Posted on 03/31/2005 4:42:13 AM PST by CSM
WASHINGTON -- The power to tax involves, as Chief Justice John Marshall said, the power to destroy. So does the power of tax reform, which is one reason why Rep. John Linder, a Georgia Republican, has a 133-page bill to replace 55,000 pages of tax rules.
His bill would abolish the IRS and the many billions of tax forms it sends out and receives. He would erase the federal income tax system -- personal and corporate income taxes, the regressive payroll tax and self-employment tax, capital gains, gift and estate taxes, the alternative minimum tax and the earned income tax credit -- and replace all that with a 23 percent national sales tax on personal consumption. That would not only sensitize consumers to the cost of government with every purchase, it would destroy K Street.
``K Street'' is shorthand for Washington's lawyer-lobbyist complex. It exists to continually complicate and defend the tax code, which is a cornucopia from which the political class pours benefits on constituencies. By replacing the income tax -- Linder had better repeal the 16th Amendment, to make sure the income tax stays gone -- everyone and all businesses would pay their taxes through economic choices, and K Street's intellectual capital, which consists of knowing how to game the tax code, would be radically depreciated.
Under his bill, he says, all goods, imported and domestic, would be treated equally at the checkout counter, and all taxpayers -- including upward of 50 million foreign visitors annually -- would pay ``as much as they choose, when they choose, by how they choose to spend.'' And his bill untaxes the poor by including an advanced monthly rebate, for every household, equal to the sales tax on consumption of essential goods and services, as calculated by the government, up to the annually adjusted poverty level.
Today the percentage of taxpayers who rely on professional tax preparers is at an all-time high. The 67 percent of tax filers who do not itemize may think they avoid compliance costs, which include nagging uncertainty about whether one has properly complied with a tax code about the meaning of which experts differ. But everyone pays the cost of the tax system's vast drag on the economy.
Linder says Americans spend 7 billion hours a year filling out IRS forms and at least that much calculating the tax implications of business decisions. Economic growth suffers because corporate boards waste huge amounts of time on such calculations rather than making economically rational allocations of resources. Money saved on compliance costs would fund job creation.
Corporations do not pay payroll and income taxes and compliance costs, they collect them from consumers through prices. So the 23 percent consumption tax would allow taxpayers to stop paying the huge embedded cost of corporate taxation. Linder says the director of the Congressional Budget Office told him it costs individuals and businesses about $500 billion to remit $2 trillion to Washington. And studies show that it costs the average small business $724 to collect and remit $100.
In 1945, corporations paid more than one-third of the government's revenues. Now they pay only 11 percent because corporations, especially multinationals, are voluntary taxpayers. In a world increasingly without borders that block capital movements, corporations pay where the burden is lowest. Linder says $6 trillion in offshore accounts would have an incentive to come home under his plan.
Furthermore, by ending payroll and corporate taxes, America would become the only nation selling goods with no tax component -- such as Europe's value added tax -- in their prices. With no taxes on capital and labor, multinationals would, Linder thinks, stampede to locate here, which would be an incentive for other nations to emulate America. ``This,'' Linder says, ``would unleash freedom around the globe.''
Critics argue that ending the income tax, with its deductibility of charitable contributions, would depress giving. Linder says: Piffle. In 1980, when the top personal income tax rate was 70 percent, a huge incentive for giving, individual charitable contributions were $40.7 billion. In 1986 the top rate was reduced to 28 percent, and by 1988 charitable giving was $86.7 billion. The lesson, says Linder, is that we give more money when we have more money.
When Speaker Dennis Hastert published a book last year, he was startled that interviewers were most interested in talking about Linder's bill, which then had 54 co-sponsors. This year Hastert added Linder to the Ways and Means Committee. Linder cheerfully says his bill would reduce Ways and Means to ``a B committee'' by ending the political fun of making the tax code ever more baroque for the benefit of K Street's clients. Bliss.
For your ping list.
This idea is very intriguing. It never seems to catch on however. I don't know much about it, what are the downsides? It seems like it would save us billions, and allow us to control, to some exstent, how much we are taxed.
I support this.
Forget Social Security for now.
Tax reform can make the GOP the majority party for decades to come.
Right up your alley. Are you going to be able to make it to DC on April 7?
What happens to all the accountants, tax attorneys and other people working in the financial industry that have to deal with taxes?
Guess they will have to do somthing differant.
gee to bad.
The way that I think of government is that they are good at national defense and building roads. Everything else they screw up, especially education, social security, and health care. Just realize that whatever money they suck out of us WILL be wasted and spent inefficeintly.
Final thought. I caught the statement about giving some kind of break to low income people. One could argue that corporations will also realize a tax break and pass it along to consumers in the form of lower prices.
There is no need for new legislation. Just abolish the IRS and return to tariffs. Tariffs are a sales tax on imports. Tariffs hamper globalism.
I think the downside is that the 23 percent could easily be raised. Also people would start to barter to avoid paying the sales tax.
The down side is that it probably puts lots of tax lawyers out of business!
A NRST allows the federal government to take money from state citizens and redistribute it back to the states in exchange for control.
The downside is the high percentage, but that is more of an indictment on the current scope of the government. The upside is that everyone will be forced to face the fact of the cost of our government.
"Tariffs hamper globalism."
Are you supportive of protectionism? Are you advocating a reduction in our participation in the global market?
Not necessarily. A national sales tax, depending on the rate, could create a vast underground network of products and services.
That said, I could support a national sales tax IF the legislation was coupled with either an elimination of the federal income tax or a reduction to a flat rate of around 5 percent.
Well, they already do that.
Simple. Instead of wasting all their (and the companies) valuable time screwing around with the complicated and endless IRS code, they can devote their time and talents to the company. No wonder so many companies in this Country fail or are forced to depart to other countries. The IRS is the is the biggest destroyer of incentive and the work force of these united States.
Oh no. I weep for all those pure
liars lawyers. NOT.
Are you sure that would be a downside?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.