Retailers Speak Out Against Proposed Consumption Tax

The National Retail Federation (NRF) spoke out yesterday about the comments made by Federal Reserve Chairman Alan Greenspan supporting a national consumption tax. The key national retail sales tax proposal before Congress is H.R. 25, the Fair Tax Act, sponsored by Representative John Linder (R-Ga). The Linder legislation would replace the current federal tax system with a national sales tax that would add 30% or more to the cost of not only retail merchandise, but also a wide range of goods and services currently not subject to sales tax such as health care and prescription drugs.

“Under the proposed national sales tax rate of 30% at the cash register, consumers would simply stop spending on anything but the barest necessities fir a prolonged period of time,” commented Steve Pfister, NRF senior vice president for government relations. “Our research shows that during the transition period from the current system to a consumption tax, the economy, employment and consumer spending would all decline significantly. The price is too great to pay for any modest growth that might come in the long-term. Many retailers and the companies behind the products they sell-especially the small businesses of America already struggling to succeed-would be out of business before they could benefit from that growth.”

A study commissioned by NRF in 2000 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.