National Retail Federation P.R. on Nat'l Sales Tax Proposal (4/14/05)

[Bush_Eats_Beef]

http://www.nrf.com/content/default.asp?folder=press/release2005&file=NRST-taxday.htm&bhfv=2&bhqs=1

NATIONAL RETAIL FEDERATION
NEWS RELEASE
THE VOICE OF RETAIL WORLDWIDE
Liberty Place, 325 7th Street, NW, Suite 1100, Washington, DC 20004
Phone: [phone] Fax: [phone]

For Immediate Release
Contact: J. Craig Shearman [phone]
[e-mail]

Retailers Say National Retail Sales Tax
Would Make Every Day Tax Day

WASHINGTON, D.C., April 14, 2005 - As the nation marks the annual April 15 filing deadline for federal income tax returns this week, the National Retail Federation warned that a proposed new National Retail Sales Tax would create a huge new daily tax burden for U.S. taxpayers.

"April 15 is tax day but the National Retail Sales Tax would make every day tax day," NRF Vice President and Tax Counsel Rachelle Bernstein said. "Consumers would be slammed with a 30 percent tax on every purchase from toilet paper to new cars - even new home purchases, health care and prescription drugs. The NRST is a horribly regressive tax that would hit the poor the hardest and would double tax senior citizens as they spend savings that were already taxed. We think one tax day a year is bad enough. Supporters try to call this the 'Fair Tax' but it's really the 'Unfair Tax.' "

"A national sales tax would devastate the nation's economy for years before economic gains - if any - would be seen," Bernstein said. "The psychological effect of such a huge tax on consumer spending would be profound. Consumers would simply stop spending on anything but the barest necessities for a prolonged period of time. This would have a ripple effect throughout the economy far beyond the retail industry."

The key NRST proposal before Congress is H.R. 25, the Fair Tax Act, sponsored by Representative John Linder, R-Ga. The Linder legislation would replace the current federal tax system with a 30 percent national sales tax in addition to existing state and local sales taxes. A study commissioned by NRF in 2000 found that a national sales tax would bring a three-year decline in the economy, a four-year decline in employment and an eight-year decline in consumer spending.

Bernstein addressed a number of issues surrounding the NRST proposal:

* While the proposal is referred to as a "retail" sales tax, it would go far beyond traditionally taxed retail merchandise. The legislation pending in Congress specifies "all new goods and services" including big-ticket items like new cars and new homes and traditionally untaxed items like health care and prescription drugs.
* While supporters claim a 23 percent sales tax rate, the number is calculated under the "inclusive" method rather than the "exclusive" method typically used to calculate sales tax. In other words, NRST supporters count a $30 tax on a $100 purchase as 23 percent of the total $130, rather than 30 percent of $100.
* The congressional Joint Taxation Committee has estimated that it would take a 57 percent tax at the cash register to replace all federal tax revenue rather than 30 percent. That calculation assumes that all new goods and services are taxed. If popular exemptions like home purchases and health care are maintained the rate would go higher.
* A national sales tax would be regressive because lower-income families spend most or all of their income while upper-income families can save a much larger percentage of their income and would not have to pay tax on savings and investments. Supporters say this issue is addressed because taxpayers would receive a rebate tied to the poverty level. In fact, the rebate would provide a tax cut for families with less than $18,000 in annual income. But families with income between $18,000 and $100,000 a year - who need to spend a large percentage of their income on necessities - would face a large tax increase.

NRF has urged Congress and the Bush Administration to simplify the existing income tax system rather than enacting a wholesale replacement with an NRST, value-added tax or other form of consumption tax, all of which would create a tax cut for the rich and a tax increase for low and middle-income taxpayers.

The National Retail Federation is the world's largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet and independent stores as well as the industry's key trading partners of retail goods and services. NRF represents an industry with more than 1.4 million U.S. retail establishments, more than 23 million employees - about one in five American workers - and 2004 sales of $4.1 trillion. As the industry umbrella group, NRF also represents more than 100 state, national and international retail associations. www.nrf.com.

[mhr]

1. Simplify The Tax System

1. First $ 20,000 of income tax free!

2. Linear progressive tax on every dollar above $ 20,000

3. Tax rate starts at 10 % and ends at 50 %

4. $ 20,000 = 10% tax - $ 200,000 = 50% tax - All income above $ 200,000 = 50% tax

5. No mortgage deduction for any property

6. All income taxed the same - no special provisions for dividends

That would be a good start.

[beyurslf]

2. A 30% tax on a new home? The housing bubble that contiues to prop

up the economy would burst in a giant ball of atomic fire.

$100,000 home=$30,000 tax

People could easily end paying $100,000 in TAX just buying a home.

[dcfirefighter]

3. Actually a 30% tax on a new home

would boost the value of existing homes by about 30%, continuing the bubble.

[beyurslf]

4. A tax boosts value? No, a tax boosts COST, not value.

If the home is worth $200,000, then you sell it for that. The tax is $60,000 and it is above that value.

A $10 t shirt is worth 10 bucks. The tax is $3. That doesn't make the shirt worth 13 bucks, though.

[dcfirefighter]

5. If I own a home

that cost $40K to build 20 years ago, on a lot that cost $10K to buy, it may be worth $250,000 today.

If there's a tax on new houses, it makes my used house a better alternative. Therefore, it's value goes up.

Used goods aren't taxed, new goods are. Taxing new goods make used goods a better alternative.

[beyurslf]

6. Right. But new homes are less likely to be bought, which slows the

growth of the new housing market. The market for new-homes-starts sustains the housing bubble; the market for home resale simply is not enough.