Here's an excerpt from a proposed national sales tax legislation...(FairTax Hr2525).
SEC. 302. ADMINISTRATION OF OTHER FEDERAL TAXES.Then there's this excerpt from an econmists testimony who favors a sales tax.(a) IN GENERAL- Section 7801 (relating to the authority of the Department of the Treasury) is amended by adding at the end the following:
`(d) EXCISE TAX BUREAU- There shall be in the Department of the Treasury an Excise Tax Bureau to administer those excise taxes not administered by the Bureau of Alcohol, Tobacco and Firearms.
`(e) SALES TAX BUREAU- There shall be in the Department of the Treasury a Sales Tax Bureau to administer the national sales tax in those States where it is required pursuant to section 404, and to discharge other Federal duties and powers relating to the national sales tax (including those required by sections 402, 403, and 405). The Office of Revenue Allocation shall be within the Sales Tax Bureau.'.
Tax RatesBe careful what you wish for.Simulation analysis and a variety of empirical calculations suggest that the retail sales tax rate needed for revenue neutrality under the Fair Tax, assuming no decline in the real value of government purchases, would be roughly 30 percent when measured on a tax-inclusive basis. This tax rate could be expected to decline by 3 or so percentage points over time as the economy expands. Moreover, if the Fair Tax were structured to include the consumption of existing housing services in its tax base, the initial Fair Tax rate would probably be about 3 percentage points lower. This could be accomplished by assessing the tax on the imputed rent on housing, where the calculation of imputed rent is based on a fair market valuation of housing real estate. This valuation could be done by local municipalities in the course of appraising houses for local property taxes.
A tax-inclusive consumption tax rate of 30 percent translates into a tax-exclusive consumption tax rate of 43 percent. While the 43 percent rate sounds very high, proper comparison of the Fair Tax tax rate with the current payroll and income tax rates requires evaluating the consumption tax rate on a tax-inclusive basis. Even a 30 percent tax rate may sound like a high rate. But one needs to bear in mind that middle and upper income households in America are typically in combined income tax and payroll tax marginal tax brackets of 40 percent or more and that low income Americans are typically in even higher tax brackets once one considers the phase out of the earned income tax credit. Hence, given the state of U.S. marginal taxation, 30 percent is a low number.
In regards the Kotlikoff testimony above:
"Eliminating complexity and distortions would be cause enough for reforming the federal income tax, but there is a much more pressing reason: notwithstanding recent wishful projections about future government surpluses, our fiscal house is not in order. Indeed, getting it in order would require not cutting federal income taxes, as some in this chamber advocate, but immediately and permanently raising them by over 25 percent."
Kotlikoff, among other things, is pushing for his personal idea of a tax increase to over 30% of gross income (30% = 1.25* 24% current total federal tax rate on income).
HR2525 explicitly specifies a 23% tax inclusive rate on retail sales of new goods and services only(i.e. consumption expenditure). Nothing anywhere near the 30%(tax inclusive) of income that Kotlikoff is pushing in his presentation.
Secondly, Kotlikoff discusses Fair Tax as examples of the main proposals before the the committee. He is more notably aligned with the Flat Tax where his past studies and main sympathies have been for many years.
When he speaks of "consumption taxes", he is including the Flat Tax and its Vat components as well. His overall presentation is to compare consumption taxes in his economist's sense of such (Gross Income less returns from savings & investment) = Consumption. Most of his commentary when speaking of "consumption taxes" is related to his studies of the Flat Tax variety of tax systems.
"The retail sales tax clearly taxes consumption. But so does the Flat Tax. Just ask Robert Hall, one of the originators of the proposal, who describes his Flat Tax as, effectively, a Value Added Tax."
In short Kotlikoff is presenting his own views of the consumption taxes as class which includes his expertise with the Flat Tax/VAT systems and specific examples relating to the Fair Tax HR2525 which at no time does he mention the HR2525 tax rate.
The tax rates Kotlikoff cites in his testimony have nothing to do with HR2525 at all.