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Economic News, Data and Analysis

National Retail Sales Tax

Looks like the president’s tax reform panel doesn’t like the idea of a national retail sales tax. I must say that I agree…

Tax Analysts Web Services: Tax Notes Today
For the retail sales tax, panel member Edward Lazear described options prepared by Treasury that showed rates of between 64 percent and 87 percent, depending on evasion levels, to replace the federal income tax with the sales tax and carve out exemptions for items such as prescription drugs, food, and clothing.
Lazear said that taxpayers in the lowest quintile would pay three times as much in taxes under such a plan. Also, he said, “the heart of the middle class would see a significant tax increase.”
With a partial replacement system, rates would range from 34 percent to 49 percent, depending on levels of evasion, if taxpayers were issued a “prebate” to help pay for necessities.
Lazear also said that it would cost $600 billion a year to implement a prebate.
Citing concerns over high rates and evasion, distribution, the cost of implementing the prebate, and complexity with states, Mack ruled the plan out.
“This is not an area which the panel wants to pursue,” he said.

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