This is regarding columnist Dennis Byrne’s screed against House Speaker Dennis Hastert (R-Ill.) (“Replacing the federal income tax with a disaster in the making,” Commentary, Aug. 23). Byrne blasts the speaker for a reference in the speaker’s book to fundamental tax reform. Here is what the speaker said: “By adopting a VAT [value-added tax], sales tax or some other alternative, we could begin to change productivity. If you can do that, you can change gross national product and start growing the economy. You could double the economy over the next 15 years.” If that is “extolling virtues of the value-added tax,” as Byrne wrote, I have somehow missed the point.
What has Hastert and others concerned are our increasing trade deficits and our disadvantage in the global economy. Most of our competitors rebate their VAT, making their nation’s products cheaper to sell abroad. The speaker knows of the 1995 study by Dale Jorgenson, then-chairman of economics at Harvard, concluding that 22 percent of what we currently spend at retail represents the embedded cost of the Internal Revenue Service. A loaf of bread has been touched by seed companies, farmers, combine operators, trucking companies, processors, bakers, distributors, cardboard manufacturers and retailers, plus the thousands of companies that make the tractors, trucks, plows, etc. Each of these entities has income tax costs, payroll tax costs and compliance costs. And the consumer pays them all at retail.
I am the author of the FairTax. It is a national sales tax that would abolish the IRS and all taxes on income. It would provide a rebate to every household at the beginning of every month that totally rebates the taxes on poverty level spending. People living at the poverty line would be totally untaxed. It would be the first time America sells goods and services into a global economy with no tax component in our price system. Does this sound like something that will “cool the economy,” in Byrne’s words? I think not.
