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The Required Tax Rate in a National Retail Sales Tax

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  • Gale, William G.

Abstract

This paper examines the required tax rate in a national retail sales tax (NRST). I show that recent proposals, such as one to replace virtually all federal revenues with a 23 percent tax-inclusive NRST, are based on assumptions that real government spending would decline by $480 billion per year and that there would be no tax avoidance, evasion, or political erosion of the tax base in an NRST. Correcting for these assumptions indicates that the required tax-inclusive rate would be over 50 percent and the required tax-exclusive rate would be over 100 percent.

Suggested Citation

  • Gale, William G., 1999. "The Required Tax Rate in a National Retail Sales Tax," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(3), pages 443-458, September.
    • Handle: RePEc:ntj:journl:v:52:y:1999:i:3:p:443-58
    DOI: 10.1086/NTJ41789734
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    1. Charles E. Mclure, 1987. "The Value-Added Tax: Key to Deficit Reduction?," Books, American Enterprise Institute, number 725195, September.
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    Cited by:

    1. Gary C. Cornia & Scott Grimshaw & Ray Nelson & Lawrence Walters, 2010. "The Effect of Local Option Sales Taxes on Local Sales," Public Finance Review, , vol. 38(6), pages 659-681, November.
    2. Gale, William G., 1999. "The Required Tax Rate in a National Retail Sales Tax," National Tax Journal, National Tax Association, vol. 52(n. 3), pages 443-58, September.
    3. Alan D. Viard, 2000. "The transition to consumption taxation, part 1: the impact on existing capital," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q3, pages 2-22.

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