Gary Johnson's Unfair, Expensive National Sales Tax
SEP 2, 2016 9:00 AM EDT
By Ramesh Ponnuru
Gary Johnson, a former governor of New Mexico, is running for president as the Libertarian Party’s nominee to draw attention to his ideas. One of those ideas is a 28 percent national sales tax to replace the federal income, payroll and corporate taxes. He would repeal the 16th Amendment, which authorized the income tax, to make his plan stick ...
... the tax rate is higher than it appears to be. Let’s say Johnson’s tax ideas prevailed, and a Kindle sold for $139 -- with $100 going to Amazon and $39 to the new federal sales tax. Advocates of a national sales tax would say that’s a 28 percent tax rate, because 39 is 28 percent of 139. That method makes for a clean comparison to the income-tax rates that the sales tax would replace. (Income tax rates are “tax inclusive,” too, if you stop and think about it.) But state sales tax rates aren’t calculated that way, and most people will get the wrong idea when they hear Johnson say he’s for a 28 percent tax, and when reporters repeat it ...
... the underground economy would almost certainly grow much larger as people try to avoid the new sales tax. European countries try to minimize this problem by relying on the value-added tax, levied at each stage of production, rather than using retail sales taxes. (The VAT has other administrative advantages.) But even those countries have lower rates than Johnson is considering. The average VAT rate in the European Union is 22 percent. We should expect much more tax evasion under Johnson’s 39 percent tax ...
https://www.bloomberg.com/view/articles/2016-09-02/gary-johnson-s-unfair-expensive-national-sales-tax
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