The Nossiter Net
The net that shall enmesh them all
Edited, Written, and Published by J.C. Nossiter
The Morning Mendacity
Tuesday, August 10th, 2004
The Nossiter Net is cast  to snare some of  the riper rascalities of the day.  Comments?  editor@nossiter.net
House Speaker Dennis Hastert appeared on NBCís Meet the Press on Sunday to champion a national sales tax as an income tax replacement. The Speakerís argument is based on false assumptions Ė letís call them lies for short.

Speaker Hastert apparently considers the regressive nature of a sales tax to be of no importance.  And it isnít, for the Speaker.  According to the Richmond-Times Dispatch, Mr. Hastert earned $242,000 in 2003.  Suppose the Hastert family of four spends $500 a week on groceries, or $26,000 a year, just under 11% of his income.  A national sales tax of, say, 5% increases his annual expense to $27,300.  Thatís still about 11% of his income. Regressivity?  What, me worry?

For Mr. Any Smith, a Hastert constituent, the picture is a little different.  Mr. Smithís family of four only spends $300 a week on food.  Even constituents have to eat. Mr. Smithís construction job pays him $75,000 a year. The $15,600 a year the Smith family spends on groceries represents 21% of their income.  Thatís nearly twice the percentage of income that the Hasterts spend on food, even though the Smiths eat only 60% as well.  A 5% sales tax is going to have twice the impact on the Smiths as on the Hasterts.  Let them eat cake, says Mr. Hastert?  The Smiths probably canít afford it.

Challenged on the regressivity of a sales tax, Speaker Hastert advanced a popular business school idea:  corporations pay taxes, and they build the cost of their taxes into their prices.  Abolish the corporate tax, corporations will lower prices, and the Smithsí food bill goes down.  Even if this were true, itís irrelevant.  And itís not true, not entirely.  Corporations pay less tax every year.  According to the Institute on Taxation and Economic Policy (www.itepnet.org), in 1969 corporate taxes represented 20% of Federal tax revenues.  In 2003, corporate taxes constituted a mere 8% of  the Federal take.  For many profitable corporations, taxes are an increasingly unimportant expense;  the many unprofitable corporations donít pay taxes at all.

Furthermore, tax savings are only passed on to consumers in the form of lower prices if  there is competition for the consumer dollar.  In many industries, like energy and agribusiness, there is little or no competition.  But what makes Mr. Hastertís point utterly irrelevant, not to say disingenuous, is that the Smiths would still pay a higher percentage of their income on staples than do the Hasterts, so any consumption tax has a proportionately higher impact on the Smiths.  Thatís unfair Ė but of course, only for the Smiths.
©J.C. Nossiter 2004
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