Byline: Carol Emert

WASHINGTON — Two Republican members of Congress introduced legislation Thursday to replace the federal income tax system with a 15 percent retail sales tax, an idea that is anathema to merchants.
At a Capitol Hill press conference, Reps. Dan Schaefer of Colorado and Billy Tauzin of Louisiana likened their plan to the Boston Tea Party.
“This time we want to dump the income tax and the IRS overboard,” Schaefer said.
By abolishing federal income taxes, including estate taxes and capital gains taxes, the IRS could be dismantled, they said.
The lawmakers asserted that corporate income taxes and business costs of complying with tax laws already drive up retail costs between 10 and 15 percent, so their plan for a sales tax would have little net impact on the prices of consumer goods.
To the extent that consumers are discouraged from spending, they will be encouraged to save more money for the future, the congressmen asserted.
The bill would also levy a 15 percent tax on imports, thereby providing an additional advantage to U.S.-made products, Schaefer and Tauzin said.
Tracy Mullin, president of the National Retail Federation, said any retail sales tax is a bad idea that would hurt merchants, many of whom are already ailing. By dampening consumer spending, which makes up two-thirds of the gross domestic product, a sales tax would also wreak havoc on the economy, she said.
“When retail isn’t doing well, a lot of other businesses aren’t going to do well and that’s going to reduce employment and tax revenues,” Mullin said.
Retailers are concerned that under the Schaefer-Tauzin plan, merchants “would become the tax collectors for the nation.”
“We will then be the repository for the ire that’s currently directed at the IRS,” said Mullin. “That’s a position we don’t want to be put in.”
But momentum for a consumption tax seems to be gaining on Capitol Hill. On Wednesday, House Ways and Means Committee chairman Rep. Bill Archer (R., Tex.) said he would introduce legislation this fall for a broad-based “tax on the consumption of goods and services.”
That tax would be a retail sales tax or a value-added tax. The VAT would be levied at each stage of the manufacturing process and could include a surcharge at retail, according to Ari Fleischer, Archer’s communications director.
The bill would eliminate the individual income tax, but Archer has not decided how he would handle corporate income taxes, according to Fleischer. Archer plans to hold extensive hearings on tax reform beginning March 20. His goal is to enact a bill into law next year. — Fairchild News Service

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