WASHINGTON -- House Republican Leader Tom DeLay surprised import-brand dealers at their annual legislative conference last week by putting in a plug for a national sales tax.
The powerful but embattled lawmaker says he wants to move beyond tax cuts and enact fundamental changes to the tax system. And his personal preference is a sales tax.
Members of the American International Automobile Dealers Association are used to friendly members of Congress appearing to voice support for items on the group's legislative agenda, such as permanent repeal of the estate tax.
A national sales tax raises a caution flag for businesses that sell big-ticket items, such as cars and trucks. Some economists who have studied the issue say a rate as high as 20 percent would be needed to replace other federal taxes.
AIADA Chairman Jim Evans said the organization would need to study the issue. "Obviously our viewpoint would be, 'How does it affect our business?' " he said.
Evans acknowledged that "purchasing an automobile would become more expensive." But it is impossible to say at this point how people would react to having more money to spend, he added. They would not be paying income tax under a DeLay-style plan.
Unexpectedly, the concept was endorsed quickly by Don Beyer, an activist Democrat and Subaru-Land Rover-Volvo dealer in northern Virginia.
"It makes eminent sense as public policy," said Beyer, who is scheduled to be AIADA chairman in 2007. He said it would improve capital formation because wealthy individuals and businesses would have more money to invest in new ventures.