A Distributional Analysis of the National Sales Tax

The Effects of Replacing Most Federal Taxes with a National Sales Tax A State-by-State Distributional Analysis by the Institute on Taxation and Economic Policy begins by quoting President Bush:

You know, I’m not exactly sure how big the national sales tax is going to have to be, but it’s the kind of interesting idea that we ought to explore seriously.

This paper does and notes:

H.R. 25 confusingly advertises its sales tax rate as 23 percent, but that’s rather disingenuous. On a $100 purchase, for example, sales-tax proponents tell us that the tax would be $30, which most people would accurately call a 30 percent rate.

This paper also argues that a more realistic estimate of the necessary tax rate would be between 50% and 60%. The main purpose of the paper, however, is to examine the distributional implications of the sales tax with this highlight:

In virtually every state in the union, the bottom 80 percent of taxpayers would face much higher taxes under a sales tax. Nationwide, these tax increases would average about $3,200 a year. Put another way, on average the 80 percent of Americans in the middle- and lower income ranges would pay 51 percent more in sales taxes than they now pay in the federal taxes that the proposed national sales tax would replace. In contrast, the best-off one percent of all taxpayers nationwide would get average tax reductions of about $225,000 each per year.