Former Arizona Governor Proposes National Consumption Tax
Jul. 28, 1987
DES MOINES, Iowa (AP) _ Former Arizona Gov. Bruce Babbitt says he'll propose a national consumption tax similar to a sales tax, which he would combine with budget cuts to eliminate the national deficit.
The Democratic presidential candidate, the first to suggest such a tax, says politicians must have the courage to raise taxes to balance the budget.
''All of the other candidates have to concede that we can't balance the budget through cuts alone,'' Babbitt said Monday in an interview with the Des Moines Register.
''The political dialogue is simply not grounded on fact and honesty,'' he said. ''We, the candidates, have been engaged in a conspiracy of evasion.''
He said he opposes an increase in the income tax.
''I would not revisit the income tax,'' he said in a campaign appearance Sunday in Eldora. ''We must have an alternative. We've reformed the income tax and now we ought to let that sit a bit. We can broaden the base a bit but we ought not to raise the rates.''
The new consumption tax, Babbitt said, would be earmarked for reducing the deficit. For each dollar of tax, Babbitt would reduce spending by a dollar to wipe out $2 of red ink.
The tax, he said, would not be added at the sales register but rather at various stages of manufacture.
He and his staff are still working on the details, he said, adding that he believes the tax could raise as much as $40 billion in new revenue. Some of the budget cutting could be cushioned by normal growth in the budget, which occurs when the economy is growing.
Babbitt conceded that sales taxes hit poor people harder than the wealthy, but said he would establish tax breaks or credits to eliminate harm to the poor.
The tax would be progressive, he said, because it would exempt food, medicine and housing. Also, part of the revenue from the tax would be used to increase the earned-income tax credit and the standard deduction on income tax returns.
''You can literally wipe out the effect of the levy on the poor,'' he said.
The new tax would last for five years when it could be reviewed to determine whether it should be continued or dropped. By that time, the deficit would be eliminated, Babbitt said.
''We must have the courage to finger specific programs and say they must be more accurately targeted and if they are not necessary, they must be reduced,'' he said in Eldora. ''And we must have the courage to raise taxes.''