January 13, 1998

MONEY Magazine
Time & Life Building
Rockefeller Center
New York, N.Y. 10020

Dear MONEY,

How unfortunate that Ann Reilly Dowd didn’t "Get The Facts On Tax Reform" (January, 1998) prior to writing an article with such a misleading title. If she had, then MONEY readers would have a greater understanding of a subject that affects every individual and business in the United States and may well be the deciding factor in the next Presidential election.

My knowledge, viewpoint and passion were aquired over the last six years as a volunteer for Citizens for an Alternative Tax System (CATS). CATS is a non-profit, grassroots organization committed to advancing legislation to abolish the IRS and eliminate all income, estate, gift, capital-gains taxes and many excise taxes; replacing them all with a simple, fair single-rate tax on retail goods and services. CATS is directly responsible for bringing the issue of IRS abuses and tax reform to the front-burner of the political stove, although we are seldom given credit or mentioned by the media.

Since I have spent the last six years researching the National Retail Sales Tax (NRST) and how various types of taxes affect society, I can only assume that the distorted and superficial summary of the NRST are due to a lack of objective knowledge on the part of Ms. Dowd and MONEY.

Or, you both believe the myths perpetuated by those who wish to retain the current tax system as a means of social engineering and six-figure income lobbyists who play the income tax code like a violin.

Myth #1: Americans pay very little in taxes.

Truth: Figuring in federal taxes, state taxes, local taxes, sales taxes, property taxes, excise taxes, capital gains taxes, inheritance taxes...you get the point.

Then there is something that those who speak up against tax reform don’t want you to know; you’re also paying 'hidden taxes'.

What are these? Taxes are included in the price of EVERYTHING you spend money on; the costs of business income tax and compliance (estimated at between 15-25% of the final price).

One of the big three auto manufacturers recently did a study of the cost of income tax and compliance imbedded in the sticker price of a new car. What do you think it was? The answer came out to be 24%. That means a $20,000 car would only cost $15,200 without the income tax.

Multiply this across the board on every dollar spent and you can see why those in power hide this fact from you. Add all of the above to compute your actual tax liability. Somewhere in the neighborhood of 45-60% of every dollar you earn.

Myth #2: The 15% National Retail Sales Tax (NRST) will not generate enough money to fund government.

Truth: The Income tax is so horribly oppressive and inefficient, it cost society $600 Billion annually, yet the NRST costs relatively nothing to collect, places no burden on society and the Government is fully funded.

Studies show a whopping 13% growth and probably much more the first year because capital is no longer taxed per Jorgenson's macro model of the economy done at Harvard Business school. This is close to $1 Trillion more to the economy and, since the federal government’s take is about 25% of the economy, a $250 Billion increase in revenues.

Myth #3: The income tax is progressive and the NRST is regressive.

Truth: First, it is important to note that the federal income tax is much more regressive than we think. The fact is the poor and middle class carry a substantial hidden income tax burden.

When a welfare recipient goes to buy a loaf of bread even though they pay no income taxes directly they will end up paying the income taxes and substantial compliance costs of the farmer, miller, baker, distributor, transporter and retailer that are hidden in the cost of that loaf.

Second, the sales tax is much less regressive than is commonly believed. Ultimately, all income is consumed. Savings is simply a deferral of consumption. If you look at life-time tax rates rather than artificial annual rates the rich pay at least as much in sales taxes as the poor.

The Schaefer-Tauzin bill (H.R. 2001 ) provides a credit equal to the NRST rate times poverty level against a workers Social Security payroll taxes. Therefore, all workers will pay no taxes up to the poverty rate. Those below the poverty rate will pay no taxes at all.

Just add up the numbers above and the 15% revenue neutral retail sales tax will generate a $600 billion dollar surplus after the first year.

We could pay off the national debt in 6 to 9 years and we could do it while paying no more for products with the sales tax built in than we do now with no sales tax but with our regressive hidden income tax.

The NRST has benefits other than purely economic ones.

1. a return of freedom and privacy - put a price tag on that one!
2. a tax system that does not punish people for being productive under the guise of 'progressivity' i.e., another lie promoting class warfare.
3. a tax system with no more 'hidden taxes' imbedded in the price of EVERYTHING!