Washington, DC, June 14--The National Retail Federation has filed comments with the President's Advisory Panel on Federal Tax Reform urging the panel to reject economically risky proposals to replace the nation's income tax system with a consumption tax or to add a new consumption tax on top of existing taxes.
"The United States should not experiment with a brand new tax system that will put our economic future at risk," NRF said. "It is better to engage in substantial reforms of the income tax that are designed to eliminate some of the major complications in the current Internal Revenue Code and stimulate economic growth without causing major economic dislocation."
NRF's remarks came in response to proposals for tax reform that were presented to the Advisory Panel during a series of hearings this spring. The panel asked for public comments on the proposals last month.
NRF on Friday submitted a detailed statement outlining the dangers of various consumption tax proposals. The statement addressed the National Retail Sales Tax proposed by Representative John Linder, R-Va., plans for a Value Added Tax similar to those used in Europe, and other consumption tax proposals.
The NRF statement cited a study commissioned by NRF in 2000 that found that a national sales tax would bring a three-year decline in the economy, a four-year decline in employment and an eight-year decline in consumer spending. The study showed that similar results could be expected if other types of consumption taxes were enacted to replace the current system.
NRF argued that consumption taxes are inherently regressive because low-income families spend virtually their entire incomes while wealthier families have larger percentages of unspent income that would go untaxed.
NRF particularly urged the Advisory Panel to reject proposals to maintain the current tax system while adding a VAT or other new tax that would be used to pay for programs such as Social Security or health care. Doing so would amount to a tax increase rather than tax reform and would provide lawmakers with "a money machine" to finance increases in government spending, NRF said.
