Remember presidential candidate Steve Forbes running on about
the flat tax?
Here's an idea that's even more radical:
Eliminate all income and payroll taxes and replace them with a
23 percent national retail sales tax.
Such a tax would be simpler to understand and administer,
according to the Americans for Fair Taxation, a group advocating
this far-reaching shift.
No more tax returns, Internal Revenue Service or loopholes for
those affluent enough to afford rooms full of lawyers and
The critics, however, deride the notion of a national retail
sales tax as unworkable, undesirable and misleading -- a
feel-good fiscal fantasy.
"If I thought it would work, I would support it," said Bruce
Bartlett, a flat-tax supporter and economist with the National
Center for Policy Analysis, a conservative think tank based in
Dallas. "They [sales tax advocates] are selling snake-oil to
people who don't like the IRS."
Earlier this month, Americans for Fair Taxation officials came
to Jacksonville, hoping to sell local business leaders on their
Here's how the national sales tax would work, according to the
All income taxes and the additional payroll taxes that fund
Social Security and Medicare would be abolished. Instead, only
consumption -- what individuals and governments spend -- would
No IRS would be necessary. Retailers would collect the tax at
the checkout counter, send it to the state, which would pass it
on to the federal government.
Doing so would tax a spending base of $5.740 trillion of
That's enough to raise the same amount that the U.S. government
now pulls in through personal income, payroll, corporate income
and estate and gift taxes, according to Fair Taxation.
Relatively few items would be exempt from the tax: unfinished
goods used by a business to make a product, and all used items,
such as an older homes.
Sales taxes typically come under fire for walloping the poor;
they spend a greater share of their income on such products as
food, housing and life's other necessities. To take the bite out
of this, Fair Taxation proposes rebating to all families the
taxes collected on necessities. The level of necessities would
be equal to the poverty level income set by the government.
For example, the poverty level for a family of four is $16,050.
So a family this size would receive a monthly check for $308
from the government to cover the taxes on necessities.
Such a tax would encourage earning, saving and investment, said
Laura Dale, a spokeswoman for Fair Taxation, which is based in
The group has launched a $10 million marketing campaign aimed
at lining up grass-roots support for the national retail sales
tax, she said. It wants Congress to take up the issue this year.
The luncheon in Jacksonville, whose sponsors included William
S. Morris III, chairman and chief executive of Morris
Communications, which owns The Florida Times-Union, triggered
both support and questions.
"The fact that it totally simplifies the tax structure for all
is great," said Dan Connell, an executive with the Jacksonville
But Baptist/St. Vincent's Health System's chief executive, Bill
Mason, worried about the impact on philanthropy. Those making
generous donations to his non-profit hospital get an income tax
deduction for their charity.
Without an income tax, there's no deduction anymore. …