A national sales tax?

Sun., Oct. 31, 2004

By Megan Cooley meganc@spokesman.com

The bottom line

The ad briefly describes a Republican-backed plan that would impose a national sales tax of 23 percent on purchases, but the ad leaves out the fact that the plan calls for abolishing the Internal Revenue Service and the federal income tax.

Still, some economists — including at least one conservative one — say the national sales tax would have to be higher than 23 percent and the plan might be too complicated to shut down the IRS.

McMorris recently backed the idea of swapping the income tax for a sales tax. In a National Taxpayers Union survey of congressional candidates dated Oct. 25, she agreed with the statement, "I will work and vote to repeal the entire federal Tax Code and completely replace it."

Asked what type of reform she preferred, McMorris chose "a national retail sales tax that provides reasonable protection for low-income people, with a U.S. Constitutional Amendment to abolish and prohibit all federal income taxes after a transition period."

Bruce Bartlett, a conservative economist and adviser to President Reagan, has said the national sales tax would have to be about 30 percent for the plan to work. Some liberal groups have said it must be 40 to 50 percent.

Proponents of the plan say eliminating some taxes will cut the base cost of goods and services. An Aug. 11 article on CNNMoney.com gave the example of a DVD player that retails for $100 now. Under the plan, the same DVD player might retail for $80 because the manufacturer pays fewer taxes to make it. A 30 percent tax would mean the consumer pays $104 for the machine—not much more than they're paying now.

Proponents also claim people will be encouraged to work harder and earn more because they won't be discouraged by the chunk of money the federal government takes out of their paychecks.

But those against a national sales tax say it would hurt the economy because people would spend less. It would eliminate home-mortgage deductions and child-tax credits. It also would hurt low-income workers, opponents say.

The sales tax would punish people who "tend to consume almost all of their income in order to stay afloat," the CNNMoney.com article said.

Some proposals for the tax call for giving low-income workers a tax refund at the start of each month. Opponents wonder how that could be administered without the IRS, though.

Bartlett calls the entire plan "a very dumb idea," but Republican support for it is gaining momentum. Among its backers are House Majority Leader Tom Delay and Speaker of the House of Representatives Dennis Hastert, who stumped for McMorris in Spokane on Friday. On the campaign trail, President Bush has said he's open to considering it.

In an August Chicago Tribune article, Hastert forecasted the plan's chances: "We have the opportunity if Bush wins and we hold the House of Representatives to really make a change to do this," he said. "I think we may have one chance in a generation."

“Sales,” a 30-second TV commercial by the Democratic Congressional Campaign Committee, says Cathy McMorris would replace the national tax code with a new federal sales tax.

“Experts say a national sales tax would eliminate the home mortgage deduction and add a new sales tax to almost every new purchase on top of the state sales tax,” the narrator says.

A national sales tax would mean paying more for milk, gas, houses and cars—even a haircut, the ad says.

A national sales tax?

Downtown Spokane stadium groundbreaking set for Tuesday

Pandemic project: Dental lab owner Robert Carnell paints pop art abstracts of celebrities

Gardening: Bird feeders safe to hang this winter after salmonella epidemic in 2020