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Freedom and Prosperity
 P.O. Box 10882
Alexandria, Virginia
22310-9998
202-285-0244

CF&P Foundation: Press Release

Center for Freedom and Prosperity Foundation

For Immediate Release
Tuesday, April 15, 2008
202-285-0244
www.freedomandprosperity.org

Which Tax Reform Plan Is Best for America?
New Video Compares Flat Tax and National Sales Tax

(Washington, DC, Tuesday, April 15, 2008) -The Center for Freedom and Prosperity Foundation today released a video reviewing the merits of the flat tax and fair tax.

YouTube Link
http://www.youtube.com/watch?v=zTTMLH9jsag

Capital Hill Broadcasting Network
http://www.chbn.com/Clip.aspx?key=AC79B25E28659CDC

The video, entitled Flat Tax vs. National Sales Tax, explains how the current tax system is deeply flawed and argues that either the flat tax or the national sales tax (sometimes known as the Fair Tax) would be a substantial improvement over the current internal revenue code. However, the video warns that a sales tax should only be adopted if the Constitution is amended to prevent politicians from imposing both an income tax and sales tax, similar to what happened in Europe.

"This intriguing video shows that a single-rate tax system, combined with the elimination of double taxation, would result in a much better tax system," said Andrew Quinlan president of the CF&P Foundation. "But a key message is that constitutional reform is needed to protect taxpayers if a sales tax is enacted."

The CF&P Foundation's Flat Tax vs. National Sales Tax video is narrated by Cato Institute Senior Fellow Dan Mitchell.

"Our educational series videos are designed to succinctly inform viewers about important issues," said Quinlan. "We are very pleased with the feedback and we hope our future videos on key economic issues are even more successful."

Previous CF&P Foundation educational videos were on tax competition, the Laffer Curve (three-part series), and cutting the corporate tax rate (link below).
http://www.freedomandprosperity.org/videos/videos.shtml

This new video, Flat Tax vs. National Sales Tax, can also be viewed on Google, Yahoo and the Capital Hill Broadcasting Network:

Google:
http://video.google.com/videoplay?docid=-5183740304169090768

Capital Hill Broadcasting Network
http://www.chbn.com/Clip.aspx?key=AC79B25E28659CDC

 

Excerpts from the Video:

Before we look at these two tax reform plans, let's remind ourselves why we hate the current tax system. ...the internal revenue code has high tax rates, and those high rates discourage people from engaging in productive behavior. And the more you contribute to America's prosperity, the higher the rate. That's economically and morally wrong.

. . . the current tax system is riddled with loopholes. Tens of thousand of pages of complex rules with myriad exemptions, deductions, preferences, and other special provisions. People with lawyers, lobbyists, and accountants can rig the system, while the rest of us have to bear the burden. The politicians love this game, of course, since they can swap loopholes for campaign cash.

,. . .We clearly need to fix the tax code. But which tax reform plan is best? From an economic perspective, the flat tax and sales tax are virtually identical. Both would junk the current system. Both would restore fairness by taxing at one low rate. Both would eliminate all forms of double taxation, and both would wipe out special-interest loopholes.

The only real difference between the two would be the collection point: The flat tax imposes one low tax rate on income when it is earned, and the sales tax imposes one low tax rate on income when it is spent.

. . .The big risk of a national sales tax has always been that the crowd in Washington may pull a bait-and-switch on us by adopting a sales tax and promising to get rid of the income tax - but then conveniently deciding that they want both sources of money. That's certainly what happened in Europe, where governments added sales taxes on top of income taxes - a tragic development that helped finance the bloated welfare states that are harming economic performance in places like France and Germany.

If the 16th Amendment is repealed and replaced by language that unambiguously precludes direct taxes on income, however, there's no longer any downside risk of going with a sales tax. But here's what makes the strategy so attractive: Even if sales tax advocates can't get two-thirds support in Congress for the Amendment or three-fourths of the states to ratify it, we still have a flat tax! So, either way, the American people win and the special interests lose.

 

For additional comments:
Andrew Quinlan can be reached at 202-285-0244, andy@freedomandprosperity.org
Dan Mitchell can be reached at 202-218-4615,
dmitchell@cato.org

 

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