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John Brummett
A national sales tax? Start the debate now
Updated: Apr. 11, 2010 | 10:17 a.m.
So I was speaking the other day to the retirees' class. We always have a good discussion.
These people are well-informed. If I get in a hurry and skip over some integral element of a public policy issue, hands will go up to remind me of a factor I've forgotten.
If I get into something legal, there are retired lawyers, even a retired state Supreme Court chief justice, in the audience. If I get into something financial, there are retired investment bankers out there. If I get into something educational, there are plenty of retired educators.
What I was saying the other day was that the only thing I don't like about our new health care reform law, which is perfectly centrist and sensible generally, is that it's not paid for and is going to break us.
That is to say I don't believe that either we or our politicians possess the will or wherewithal to impose, over a decade, these professed half-billion dollars in reductions in Medicare spending that the Congressional Budget Office plugged into projections as instructed by the politicians.
Just look at how we already have incremental annual reductions in Medicare payments to doctors written into law and how Congress, each year, waives them with the temporary "doctor fix."
I told these couple of hundred Medicare recipients that I doubted they'd like it when their doctors started whining to them that the government was making Medicare such a bad deal for them that they might not be able to spend as much time with them or even see them at all.
I paused for disagreement. None was forthcoming. Nodding -- there was some of that.
What I was getting to was this: Our deficit appears ready to stay frightfully high, even grow, for the next several years. What is it, then, that regular people do when they can't pay their bills?
They cut whatever expenses they can and take second jobs to bring more money into the household.
They attack a deficit two ways, that is, from both the income and the outgo.
So it must be with our federal government within the next decade. It will have to demonstrate whatever actual spending reductions we can reasonably afford in the government services on which we depend. Then we will have to talk taxes, which I predicted to be in the form of a national value-added tax, which is a consumption tax somewhat akin to a national sales tax.
It's not the politicians' fault. It's all our fault. So we'll all have to pay. It's called sacrifice. It would pale against the sacrifice some of the Americans who came before us made. (Anybody watching "The Pacific" on HBO?)
A fellow spoke up. He said only Democrats would be willing to propose a value-added tax and that they'd pay a dire political price and accomplish nothing.
But there are two things about that.
One is that a few conservative commentators have started talking about it already. They see handwriting on the wall and they far prefer new taxes on consumption to higher taxes on income and wealth.
The other is that American political decision-making is based almost entirely on fear. We vote in presidential elections for the candidate who scares us least.
Just wait for a few years of economists' warnings that our debt and deficit have risen to such dangerous levels in proportion to our Gross Domestic Product that we are on a clear path to becoming wards of our creditor nations. Then you'll see public opinion begin to move.
We are now in the process of setting up a bipartisan commission to recommend ways to get the deficit down. If nothing else, this will provide a good place to introduce the discussion toward the inevitable.
John Brummett is an award-winning columnist for the Arkansas News Bureau in Little Rock and author of "High Wire," a book about Bill Clinton's first year as president. His e-mail address is jbrummett@ arkansasnews.com.
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Just a side note to my previous post on the FairTax. Because the tax would be collected at the point of sale, NO ONE would be exempt. Anyone, citizen, illegal immigrant, foreign tourist and those making a living in the underground economy, would pay the tax. From the Wall Street Journal: "Then there's the fast-growing underground economy, where millions of nannies, construction workers, landscapers and others are paid off the books, their incomes largely untaxed. The best guess as to the size of the output of this shadow economy is about $970 billion, or nearly 9% that of the real economy. It could soon pass $1 trillion." Revenue from that $900 million would be $207 million that is currently being lost.
Providing our politicians do not try to bastardize the FairTax it is, while not perfect, the best alternative to the present income tax.
Let's be clear, a VAT and consumption tax are NOT the same. A consumption tax would is a point of sale tax whereas the VAT is a tax at every stage of production of a product and is an unseen tax by the consumer. We really do need a consumption tax but only if done correctly. There is a bill currently in Congress, the FairTax, that does just that. First, the FairTax eliminates ALL federal taxes on individuals and businesses. No more tax withholding for medicare and social security. No more tax on savings or capital gains. No more inheritance tax. And, the FairTax provides a monthly "prebate" to all households (up to the poverty level) to assure no one pays tax on necessities. Because businesses would no longer pay income tax and individuals would take home their entire pay with no deductions, the cost of products/services would be reduced by 20% or more and individuals would have more spending power with their increased take home pay. There are too many positive provisions to the FairTax to go into here. One result would be the influx of businesses to our country. Businesses leave this country because it is cheaper to do business overseas. Eliminating taxes on businesses would make the U.S.A. the mecca for businesses both American and Foreign. And, the trillions of dollars currently sheltered in off shore bank accounts would be liberated and returned to the American banking system. The bill has been studied to the tune of over $25 million and would fund the federal government at its present level. The FairTax is a 23% tax of ALL NEW goods and services. Used items would be untaxed.
Dems are hilarous.
They pump up spending then run big deficits and then claim we need to raise taxes to pay for it all.
The joke is on us.
National Sales Tax . . .
What, JOHN BRUMMETT are you suggesting a regressive tax on the people of the country?
Even worse . . . and not said, yet!
A value added tax?
It's time to shovel the manure out of the barn.
I say, eliminate all local and state sales taxes . . . and fees.
Institute a flat income tax at the state level, with a standard per person cost of living exemption for the individule. And a Net Income tax on Corporations.
Eliminate the Federal Income tax.
Allow a the Federal Government to tax the State for its services.
And end direct elections of Federal Senators, and return that selection function to State Government.
I guess the point that you never made was "why not pass a bill that we could afford in the first place?" I really think I heard alot of those Bad Republicans say that. President Obama got his way and the payback will be in November.