Delegation Frowns on National Sales Tax
WASHINGTON 11/19/04- Replacing the current tax code with a national sales tax doesn’t sit well with some members of the New Hampshire delegation, but most think simplifying the tax code is necessary.
“It’s really a bad idea whose time has not come,” said Sen. Judd Gregg, who will chair the Budget Committee in January. “We don’t need a new major engine of revenue.”
President George Bush has said overhauling the tax code will be one of his major priorities in the next four years. An August campaign appearance in which Bush entertained the idea of replacing the current tax code with a national sales tax sparked a buzz about the idea.
Sen. John Sununu said that reforming the tax code was necessary, but said a national sales tax wash highly unlikely to get through committee, much less make it to the House or Senate floor.
“We need a flatter, fairer income tax that provides a generous exemption for families and eliminates the complex maze of loopholes and deductions that frustrates most taxpayers,” Sununu said in a written statement.
Rep. Charles Bass has similar feelings about the tax, according to spokeswoman Margo Shideler.
“Although the Congressman supports reforming our current tax system to make it fairer, flatter and easier to understand, he has serious concerns that a national sales tax would undermine the New Hampshire advantage that comes from not having a state sales tax,” Shideler said.
Rep. Jeb Bradley said that it was too early to say what would work best- a national sales tax, a flat tax or simplifying the tax code- but said simplifying the tax code was necessary.
“Our tax code is really pretty cumbersome and complicated,” Bradley said. “At a minimum we have to figure out a way to simplify our tax code, so that compliance costs are easier to deal with.”
Bradley said there are benefits and downsides to a national sales tax.
“People will argue that a consumption tax is more transparent. You know what you’re paying, when you’re paying. If you object to the tax you don’t have to consume that good or service. So it’s a little bit more voluntary in that regard.”
“On the other hand, there are those who do believe that it more adversely affects people at the lower end of the economic spectrum,” Bradley said.
Chris Edwards, a scholar at the Cato Institute in Washington, agreed that it was more transparent, but there are problems with the details of the tax.
“If you make $50,000 on income, you’ll see $50,000 on pay stub. But when you went to the store prices would be higher and you’d pay the tax,” Edwards said. “And questions of whether you could do the rate that high, what possible rate would be..do you tax everything, do you exempt healthcare, do you exempt food?”
Both Edwards and Bruce Bartlett, an economist at the National Center for Policy Analysis, a public policy research institute in Washington, said that the tax would have to be about 30 percent.
Edwards said that in 1990s the most public plan would have replaced the individual and corporate income tax with a 15 percent sales tax. He said with the latest proposals the rate would have to be 30 percent.
Bartlett said the tax may even have to be higher and that some estimates place it at 50 percent.
“It’s just utterly, utterly impractical,” Bartlett said. “All the experiences of foreign countries tell us that you can’t collect rates much above 10 percent.”
Edwards said he did not think Bush would impose a national sales tax.
“It’s certainly the most radical proposal.. He might not want to be as radical as a sales tax,” Edwards said.
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