Byline: Jennifer Owens

WASHINGTON — The National Retail Federation came out swinging Thursday against a Congressional proposal to replace federal income taxes with a 15 percent sales tax, saying consumers will be sticker-shocked if it passes.
Called the National Retail Sales Tax, the bill would abolish federal taxes — income, capital gains and inheritance — as well as the Internal Revenue Service.
It would not, however, erase dedicated levies such as gasoline taxes designated for transportation projects. Sponsors Rep. Dan Schaefer (R-Colo.) and Billy Tauzin (R-La.), who first introduced the bill last year, plan to reintroduce it on Tuesday.
Supporters, including the bill’s eight co-signers, say abolishing most federal taxes and the cost of complying with them would lower retail prices by 10 to 15 percent.
The result, say supporters, would give domestic products a competitive boost against imports and Americans more disposable money.
But at a press conference, the NRF argued that tacking a federal sales tax onto existing state and local taxes would hurt lower-income shoppers the most by raising purchase prices. And unlike most sales taxes, NRF added, the bill would not exempt food or service costs, such as plumbing work.
In putting forward NRF’s argument, Bruce Bartlett, an economist and senior fellow at the National Center for Policy Analysis, quoted various studies showing that to truly replace income taxes, a 19 to 44 percent sales tax would be necessary. In any case, he said, “the rate would have to be exceedingly high.”
Robert J. Damuth, an economist with Nathan Associates, a consulting firm based in Arlington, Va., claimed the bill would have the same impact as the 1991 recession, with retailers not recovering for five years.
Damuth argued that a federal sales tax would be too troublesome for retailers to collect and too difficult for the government to cross-reference, since most consumers do not keep records for all purchases.
A spokesman for Tauzin, however, called the NRF’s concerns “unnecessary hysteria.”
The spokesman noted that retailers already collect sales taxes for state and local governments and added that the bill includes a 0.5 percent slice to compensate retailers for the additional work. States would receive a 1 percent chunk.
But John Motley, NRF’s senior vice president of government and public Affairs, said NRF is not convinced and hopes to nip the bill in the bud before it blossoms. “I’ll be honest with you,” he said, “anytime you mention a consumption tax, we as retailers become very, very nervous.”

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