(This issue consists of excerpts taken
from the CATS National Web Site)
NRST
(National Retail Sales Tax)
Basics
"As taxes are necessary to fund government, what we are proposing instead of the income tax is a simple, fair national retail sales tax which will recreate conditions of economic access and opportunity through the revitalization of the U.S. economy. This change will also provide political reform essential to our future survival and liberty."
- Citizens for an Alternative Tax System (CATS)
The U.S. income tax system is a maze of 2,000 pages of the IRS code, 12,000 pages of regulations and over 200,000 pages of court rulings. And nearly any taxpayer can relate at least one horror story about dealing with rude, intrusive representatives of the IRS.
The National Retail Sales Tax Act of 1999 (H.R. 2001) is the first bill in U.S. history to offer American taxpayers relief from the mind-numbing confusion and chilling invasion of privacy that is our federal income tax system. At last, we can be free from the IRS!
The choice is yours. You, as a taxpayer and voter, can restore freedom in this country. Your Congressional Representative needs to hear that you want to stop income tax withholding from your wages and abolish the IRS. Contact your Representative and Senators, and inform them that you support a National Retail Sales Tax.
"The hardest thing in the world to understand is the Income Tax."
- Albert Einstein
"A long habit of not thinking a thing wrong, gives it a superficial appearance of being right."
- Thomas Paine
"Government is not reason. Government is not eloquence. It is force. And, like fire, it is a dangerous servant and a fearful master!"
- George Washington
Notes on the NRST:
Easy To Administer
David Bradford, a Princeton economist and former U.S. Treasury Department official, has noted that it would be much simpler to administer a NRST (National Retail Sales Tax) than the current income tax.
In his book, Untangling the Income Tax, he wrote, “A retail sales tax has the advantage of familiarity to taxpayers and of being easily understood.”
Sales tax would be reported by companies rather than by each American citizen. There are only about 10 million tax-filing corporations and partnerships in the United States that would file such returns. The number of income tax returns, not counting corporate tax returns, is now over 113 million. These 113 million filings would be gone!
The vast IRS bureaucracy would not be needed to handle less than 10 percent of the current volume of taxes. Nor would their excessive powers be justified any longer.
Most states in the U.S. already collect a sales tax and are doing so efficiently. Their reporting and collections systems are workable. They don't have the many flaws and problems that impede the IRS' operations every year.
“The administrative apparatus for imposing a national retail sales tax if we wanted one already exists in most areas”, stated New York University economist Melvyn B. Krauss, writing in Tax Notes. “All that is required of the shopkeeper is to piggyback the federal tax on top of the state and (sometimes) local sales taxes”, he stated.
A NRST would be simpler to work with, not only for the government, but also for private enterprise. Individual taxpayers and businesses would save the 5.4 billion hours of valuable time that it takes them now to fill out their income tax returns - time that could be devoted to increased production.
Administrative Costs
Under the NRST only firms with retail sales of goods and services would collect the tax.
This would represent a significant reduction in the volume of record creation, maintenance and filing required for tax compliance. The number of filings required for a NRST would be at least 90 percent less than those required by the current system.
Visibility
The NRST would be more visible than either income taxes or a Value Added Tax (VAT).
Given the current state of voter distrust and disaffection for government, this factor of visibility can be viewed as a political advantage of this method of taxation.
The amount of a NRST would be explicitly stated on the sales receipt, not hidden as taxes presently are, and would be with other alternatives.
The NRST is a pay-as-you-go tax and this also adds to its appeal.
Simple To Keep Track Of
Businesses would need only simple accounting procedures, already in use by most firms, to keep track of a NRST.
As an example, in Denmark a business tax return for reporting sales tax is a post card with only three lines on it. Thus, a NRST would be far less expensive to administer than an income tax.
Studies in Sweden, the United Kingdom, Portugal and Australia found that a consumption tax, such as a NRST, costs less to administer than an income tax.
Some have claimed there will be compliance problems with a NRST, speculating that many people would resort to a barter system to avoid taxes.
Some have claimed there will be compliance problems with a NRST, speculating that many people would resort to a barter system to avoid taxes.
There is no reason to think that this honesty will change under a NRST. In fact, with the lower overall tax burden and no individual reporting requirements, it's reasonable that folks will feel better about the restoration of the compact between citizens and their government that compliance will actually improve.
The National Retail Sales
Tax Act of 1999,
H.R. 2001.
Principles
Almost any question about the NRST can be answered by knowing and applying the following NRST principles:
- No income is taxed until it is consumed. Capital gains and interest income are not taxed as long as that income is reinvested. The income is taxed only when it is consumed. The same is true for income derived from labor.
- Deductions are no longer a relevant concept under a sales tax. Taxpayers, not the government, get first crack at their paychecks. There are no deductions from the paycheck, so there is no need for a tax deduction for state and local taxes or for charitable contribution. All money paid for taxes, or given to charities, is tax free (or equivalent to a 100 percent deduction under the income tax).
- All goods and services sold at retail are taxed. The NRST also applies to utility bills, legal fees, video rentals--any and every final good or service that is consumed.
- No tax should be hidden in prices ---- all burdens should be visible in the tax rate. This way we all know what the cost of government is and can make rational decisions about its value relative to other costs we incur. All retailers would be compensated for their paperwork; otherwise, compliance burdens would be hidden in their prices.
- No business consumption (inputs) is taxed. Nothing (including paper clips) used to directly or indirectly produce a good for retail consumption is taxed. Otherwise it would be hidden in the retail price of the final product.
- The broader the base, the lower the rate -- and the rate must be kept as low as possible. If food, housing and clothing were exempted from the NRST, the rate would automatically double and the rich would needlessly benefit.
- Businesses do not pay taxes, they only collect them. Under any tax system--including the income tax--only consumers pay taxes because businesses have no one else to whom to pass them along. More specifically, businesses can add the tax and its collection costs into the price of its goods, services, lower wages, or the return on capital to investors or owners. In each case the cost is borne by individuals as consumers through higher purchase price, lower wages, or lower return on investment.
- The government only collects the tax on the value of a good once. The used property tax credit gives a 100 percent rebate to the seller for any unused portion of used good that is sold. This avoids double-taxation.
- Just about any criticism that applies to the NRST also applies to the current income tax system and the flat tax. The problem of determining whether a good was purchased for business or personal use is the same no matter what type of tax system. In all cases, prices go down and take-home pay goes up -- more than offsetting the addition of the NRST.
Internet Notes
For those of you with computers and Internet access, please visit CATS Las Vegas Chapter Web Site whenever you need tax reform information. If you haven’t received any email updates from me lately, it’s probably because I don’t have your email address. Send your email address to: bracken@catslv.org if you would like to recieve these updates.
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