Shots Across The Bow

Flat sales tax

In Washington, the Bush Administration is looking at replacing the income tax with a flat national sales tax.

The administration's plan, first reported by the Washington Post last month, calls for shifting the tax system away from taxing income and targeting consumption instead. The paper reported that administration tax policy wonks within the Treasury Department are still working out the details, and that their progress has largely been kept under wraps.

Some of those who oppose the sales tax say the rate would have to be too high to fund the gov't at current levels:

William Gale, a senior fellow in economic studies at the Brookings Institute, a public-policy think tank, estimates that proposals to replace virtually all federal revenues with a 23 percent tax-inclusive national sales tax rate are based on assumptions that real government spending would decline by $480 billion per year, and that there would be no tax avoidance, evasion or political erosion of the tax base.

"Correction for these assumptions indicates that the required tax-inclusive rate would be over 50 percent," he writes in a 1999 policy paper.

Hmmm. My actual tax rate now runs about 14%, after all my deductions. This guy is saying my tax rate will more than triple if we go to a consumption tax. I wonder, if the rich aren't paying their fair share now, who is covering that other 36% for me?

The poor?

Posted by Rich at November 13, 2002 11:35 AM