NRF Distorts Domenici-Rivlin Sales Tax, 11/18/10

The National Retail Federation has it in for consumption taxes and wrongly opposes the Domenici-Rivlin plan, “Restoring America’s Future” from the Bipartisan Policy Center. NRF fears the short-term losses that might occur from an increase in prices. Fair enough. But, the Ernst & Young study they funded looks only to the effect of an ADD-ON value added tax, and that is not what the Domenici-Rivlin deficit reduction package is all about. (E&Y cannot be faulted; they were given the assignment to look only at an add-on VAT and not a VAT substitute for other taxes.)

First and foremost, D-R is intended to get the economy on a firm footing for growth, and they do this with an initial stimulus for jobs that puts money in the hands of consumers. NRF should really like that. The Deficit Reduction Sales Tax proposed in D-R is 3% in the first year, and rises to 6.5% thereafter, but it is offset in the first year by a payroll tax holiday for both employers and employees (combined 12.4%). Employers will have a reduced burden for employment, and that should help stimulate jobs. Employees will have extra cash in their pockets which when spent will be an off-budget stimulus to the economy. will be a boost to the economy and retail sales.

NRF is simply wrong-headed on this. The payroll tax cut and increase in consumer income in the Domenici-Rivlin plan will be good for retail business, jobs, and the economy.

Daniels, Gov. Mitch Floats Sweeping Tax Reform: VAT plus Flat Income Tax, 10/14/10

Indiana Gov. Mitch Daniels, endorsed sweeping tax reform on the occasion of accepting the Hudson Institute’s Herman Kahn Award. Gov. Daniels selected a quote from Kahn’s 1982 book, “The Coming Boom”: “It would be most useful to redesign the tax system to discourage consumption and encourage savings and investment. One obvious possibility is a value added tax and flat income tax, with the only exception being a lower standard deduction.”

Gov. Daniels, who once headed the Hudson Institute, a conservative think tank, and served as Director of the OMB under President George W. Bush added: “That might suit our current situation pretty well. It also might fit Bill Simon’s line in the late ‘70s that the nation should have a tax system that looks like someone designed it on purpose.”

The above quote can be found in the video from 17:15 to 19:30.