George Will: The Tax Plan To Kill K Street:
"... bill [proposed by US Rep. John Lindner (R-GA)] would abolish the Internal Revenue Service and the many billions of tax forms it sends out and receives. He would erase the federal income tax system — personal and corporate income taxes, the regressive payroll tax and self-employment tax, capital gains, gift and estate taxes, the alternative minimum tax, and the earned-income tax credit — and replace all that with a 23 percent national sales tax on personal consumption."
Sounds good, but it leaves out a few things. For example, the day you abolish the IRS can't possibly happen until years following the switch since amended returns can still be filed and tax cheats must still be pursued in court. But you will have to set up a new bureaucracy to license every retailer in America to collect the tax. (This isn't just a matter of piggy-backing on existing state sales tax systems - some states don't have a sales tax.) And this new bureaucracy will create new forms and procedures, although there will be fewer filers who will be caught up in this new web.
Then you have to decide what the tax applies to. Having had a brief stint of work for the Pennsylvania Revenue Department, I can assure you this is not as easy as it appears in George Will's commentary. For example, do you expect that many representatives are going to vote "NO" when the inevitable amendment to exempt prescription drugs is offered? Or how about food at the supermarket? But if we tax prepared foods at Boston Market, will we also tax the rotisserie chicken you bought at the Safeway even though supermarket food purchases are exempt?
And, if we do tax foodstuffs, how will the bureaucrats keep track of all the farmers who sell direct to the public at farmers markets, from roadside stands, or just out the back door to a few neighbors.
And then there will be the nuisance of issuing exemption certificates for all the manufacturers that purchase some of their materials at retail.
And if we are taxing goods and not services, how will we know the difference? This isn't as silly as it looks at first blush. In the computer business for example, system integrators put together package deals of software and hardware to meet specific customer needs - is the whole contract price taxable, or just the hardware and software? If your mechanic needs to machine a part to make it fit in your car, has the machining made it a new product to be taxed at a higher price, or is the machining a pure service just like the installation of that part and not subject to the new tax? These sorts of questions are contentious enough in administering state and local sales taxes that typically range from five to eight percent, throw on a national tax of 23 percent and the stakes get much higher.
I'm not saying I'm opposed to the idea in principle, just that it ain't as simple as they say. And it will not lead to mass unemployment in Gucci Gulch, however much the country might benefit from reducing K Street to its former insignificance.
