Sales Tax May Be Hard Sell Group Pushing 23% Tax to Replace Income Taxes

Article excerpt

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

accountants.

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

plan.

Here's how the national sales tax would work, according to the

group:

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

be taxed.

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

consumption.

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

Houston.

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

Jaguars.

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. …