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Taxing sales looks attractive to Republicans

A good measure of a populous groundswell is when a book about taxes pushes the diet fads and Hollywood kiss-and-tell biographies off the top of the New York Times bestseller list as people are grabbing something to read on their late-summer vacations.

The FairTax Book by talk-show host Neal Boortz and Rep. John Linder has quickly climbed the charts fueled by Boortz's syndicated radio program, a book tour and the Republican congressman's stature as a senior member of the House Ways and Means Committee. But honestly, could there be a dryer topic than tax policy? They must have tapped into public sentiment.

The duo argues that the Internal Revenue Service auditors, tax forms and April evenings of paper shuffling could all be eliminated by a switch from income taxes to a national sales tax of 23 percent on all goods and services - from movie tickets to haircuts.

Republicans in the Georgia General Assembly have already introduced a bill that would switch to sales taxes from property taxes the way schools are funded locally. While the bill hasn't passed, it has gotten plenty of attention by special interests.

For years, Republicans have said income taxes and property taxes were bad policy because they "punish" achievement and investment while "rewarding" consumption.

Many mainstream economists agree. Individuals and societies build wealth by saving and investing rather than spending, the theory says.

Republicans practice what they preach. They do save their money and invest it, often in real estate. So, many of them would benefit personally from changing tax policy.

Certainly, a number of the people buying the book are motivated by their personal interests. Yet, it wouldn't be correct to ascribe greed as the motivation of everyone supporting sales taxes over other forms of taxation.

The political appeal of sales taxes can be broad. Consider the end of paperwork, the increased take-home pay and the ease of tax avoidance. Under the current income-tax laws, minimizing tax exposure requires complex schemes. Under a sales tax, tax avoidance is as simple as declining a purchase.

Advocates for the poor and low-paid workers and retirees note how regressive sales taxes are. That is, since certain purchases are necessities regardless of wealth, a greater share of a poor person's income will go to paying a sales tax than would be the case for a millionaire.

Sales-tax advocates counter that in actual practice, the well-heeled would pay a greater percentage of their income in taxes than they do under today's network of income-tax loopholes. Plus, most sales-tax plans make some provisions for rebates or exemptions for the qualifying destitute, shifting the paperwork burden from the richest to the poorest.

Teachers, government workers and those dependent on government payouts - including doctors and hospitals - may also oppose sales taxes because they are the most vulnerable to economic swings. Georgia, and most other states, just climbed out of four years of lean budgets caused by depressed tax collections still slumping long after the overall economy recovered. The reason is states have a greater dependence on sales taxes which drop when individuals cut back on their shopping due to job losses or depleted savings. On the other hand, income taxes, and especially property taxes, keep chugging along because they're not dependent on personal actions.

Of course, Republicans like the idea that government would automatically shrink when the rest of the economy does, but typically the need for government services increases during times of economic hardship.

Another pitfall for Republicans is that the professionals they normally count on for support, such as lawyers and accountants, won't be eager to have their services taxed, effectively driving up fees for their clients. Ask Bob Martinez, who was ousted as Florida governor for daring to tax services in the 1980s.

The Georgia school-tax bill has another feature that could become a pitfall for its supporters. It doesn't completely outlaw property taxes, a device meant as a safeguard against prolonged recessions. The political risk here is that voters could fear that the sales tax will simply become an added tax on top of the existing property tax.

Suddenly sales-tax advocates could find themselves painted as champions for tax increases. That scenario played out in 1980 when U.S. Rep. Al Ullman, the Democratic chairman of Ways and Means from Oregon, proposed a national sales tax. His upset re-election loss, combined with Martinez's, are the reasons no politician of either party has seriously pushed a sales tax/services tax idea in decades.

It may be that those lessons are forgotten. Or maybe the current crop of advocates will turn out to be more skilled politically and actually pull off their coup.

Walter Jones is the bureau chief for Morris News Service. He can be reached at walter.jones@morris.com or (404) 589-8424.