Rubio Attempts Another Sales Tax Shift

Florida counties and municipalities increased property taxes because of tax cuts by Jeb Bush and the legislature that created less revenue for schools. Marco Rubio attempted to cut property taxes by creating one of the highest sales taxes in the country. He is now attempting to create a smaller version of that sales tax shift.

But after his speech, the House Policy and Budget Council voted to include a 1 cent sales tax increase in order to cut school property taxes by nearly $4-billion a year. The average property owners' tax bill would drop by 15 to 20 percent, Republicans said.

Rubio floated the idea earlier this year only to meet a roadblock in the Senate. Then, as now, senators view it as a tax increase, a regressive one at that.

It is a sales tax increase and will hurt poor people the most. Contrary to economic zenmasters such as Dennis Hastert and Grover Norquist, a national sales tax does not make up the differnce. Robert S. McIntyre broke down the bogus math of the Americans for Fair Taxation.

I was curious about how the group did its arithmetic, so I checked out its Web site--www.fairtax.org--and sent a note to the E-mail address to get further information about the group's calculations.

According to the group's figures, at 1995 levels a new sales tax would have to raise $1.36 trillion to replace all Federal income taxes, payroll taxes and estate and gift taxes. Under its plan, the group says, taxable spending would be $4.6 trillion (after accounting for rebates to partly protect lower-income families).So, $1.36 trillion divided by $4.6 trillion would be the required sales tax rate. Fine, except that $1.36 trillion divided by $4.6 trillion is not 23 percent. It's about 30 percent.

It turns out that the group's purported 23 percent tax rate is misleading and hypothetical. It came up with that number by dividing the sales tax by the cost of a purchase plus the tax. So if the tax on a $100 purchase is $30, the group prefers to call it a 23 percent "tax inclusive rate" ($30 divided by $130). Ever hear of computing a sales tax like that?

The fact that the group's sales tax, even by its own figures, entails a 30 percent tax rate is only the beginning of the math problems. The group's backup materials also assert that almost a third of its projected sales-tax revenue is supposed to come from taxes the Government will pay to itself. Build a road, pay yourself a tax. Buy some planes for the Air Force, pay yourself some more. And so on.

Unfortunately, that shell game won't work. Without these phantom governmental tax payments, the sales tax rate would have to jump to 42 percent to break even.

Conservative love sales taxes as the answer to all ails. Unfortunately, sales taxes by themselves can fund very little. Unless, people want to pay a nearly 50 percent tax for shopping items. How is that not regressive?