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Duncan throws support to national sales tax

Imagine paying a federal sales tax of 23 percent on every purchase you make. Hard to swallow? Sure, but keep in mind that along with the tax is the repeal of practically all federal income taxes. Does that make the idea of a federal sales tax a little more palatable?

What it boils down to is this: The more you buy, the more taxes you pay — regardless of your income. The tax change also would abolish the Internal Revenue Service, no doubt an appealing notion to anyone who was sweated through the 1040 long form.

It’s called the Fair Tax Act of 2003, and the bill has quite a few supporters, including U.S. Rep. John Duncan Jr., R-Knoxville. He’s one of 41 representatives cosponsoring the legislation. Georgia Rep. John Linder introduced the bill, known as H.R. 25, in January.

“Every poll I’ve seen shows that at about 85 percent of Americans want to change the tax system,” Duncan told the farragutpress. “The Fair Tax Act offers them an alternative.”

According to the text of H.R. 25, the bill would repeal federal income taxes, federal estate and gift taxes, and federal employment taxes. The bill then “imposes a tax on the use or consumption in the United States of taxable property and services.” The tax rate would be 23 percent in 2005 and adjusted slightly thereafter.

“I am only for things that would lower people’s taxes because the average person today has to pay almost 40 percent of his or her incomes in taxes of one type or another — federal, state, local, sales property, income, gas, excise — all the different taxes,” Duncan said, adding that if his national sales tax plan were implemented, it would mean an average annual tax savings of approximately $1,500 a person. “That’s tremendous,” he said. “A family of four would save $6,000 a year.”

One undeniable benefit of a national sales tax is that it would net money from what Duncan calls the “underground economy” — drug dealers, smugglers, prostitutes, illegal gamblers, loan sharks and the like who pay nothing in federal income taxes. When they conclude their illegal endeavors, people in the “underground economy” are buying the same goods and services as legitimate taxpayers. Criminals buy TVs, cars, jewelry and groceries just like everyone else, and this is where a national sales tax would take its bite.

“It’s estimated that the ‘underground economy’ generates at least a trillion dollars,” Duncan said “That means $200 (billion) to $300 billion, at a minimum, is being avoided by the criminals. That means the honest, law-abiding citizens are paying the taxes right now for these illegal people.”

A bill that would radically alter the United States’ financial landscape, regardless of the best intentions, faces an uphill battle to say the least. The current tax system has been in place for generations, and many individuals and corporations have benefited greatly from its design — it’s not going anywhere without a major fight. Frankly, a piece of tax legislation like H.R. 25 that targets 2005 for implementation has little chance (probably none) of passing this year, and Duncan said he knows it.

“My hope is that in a few years’ time we would pass something like this,” the congressman said. “For years I’ve thought that we could come up with a better tax system than this, and I’ve had many constituents over the years ask me to explore this issue.”

Duncan said that one of the primary goals of H.R. 25 is to spark a dialog on revamping the federal tax system. Even if a national sales tax doesn’t come until after he’s out of office or even after his lifetime, Duncan said the issue is important enough that it deserves investigation and discussion right now.

Opponents of a national sales tax argue that the system would be too regressive, that it would place a larger relative tax burden on poorer families who spend most, if not all, of their incomes and save very little.

Duncan said one group that opposes a national sales tax is the tax attorneys, but at least one tax attorney said some aspects of the proposal are beneficial.

Charles Finn, a tax attorney at Kramer, Rayson, Leake, Rodgers & Morgan, said while the regressive nature of a national sales tax is a major concern, it would be advantageous in terms of family financial planning and estate planning.

“I think it would be liberating,” Finn said, noting that many of the decisions people make in terms of financial planning are made based on determining the best way to minimize federal taxes’ impact. “It would be nice to make those decisions based on desires rather than the tax-tail wagging the dog.”

Finn said that if a national sales tax were to come about, there would need to be an equitable way to implement it, but for now a bill like Duncan’s that “elevates (the issue) and leads it to an informed discussion would be good.”

“You have to look at what’s driving the (national sales tax) movement,” Finn added. “It’s a group who despises the IRS and wants it disbanded. There’s an innate disdain for the IRS, but is there enough voter inertia to propel radical change?”

It’s a grassroots campaign at this point, but with organizations like Americans for Fair Taxation gaining new members and contributors every day, the future of taxation is open for debate.

To search for the complete text of H.R. 25, visit Duncan’s Web site at

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