Here is something to consider, if you think a consumption tax is a good idea - in 2005 Ohio instituted the CAT (Commercial Activity Tax).  It is a "tax on the privilege of doing business in Ohio."

See Summary of Ohio's Commercial Activity Tax and Other Ohio Tax Reform.

The plan phases out the tax on tangible personal property over four years, and the corporation franchise tax over five years. It also reduces all personal income tax rates by 21% over five years. Various excise taxes are increased and the 10% rollback on real estate taxes for most commercial and industrial property is eliminated. However, the centerpiece of the plan is a commercial activity tax (“CAT”). The CAT is essentially a tax on gross receipts from commercial activities. It is imposed at a rate of 2.6 mills (.0026) on the taxable gross receipts of virtually all commercial activity in Ohio.

This is basically a hidden sales tax.  Business are prohibited from tacking on a separate charge to cover the CAT, but they can pass it along to consumers in the form of higher prices.  This means that the increased price of the goods is subject to the CAT - so even the taxes are taxed!

It has been hotly debated in Ohio since its passage.   There is currently a suit pending with the Ohio Supreme Court to determine if it can be constitutionally applied to those who sell groceries, since those sales are exempt from sales taxes.  The State takes the position that it is not a sales tax and nothing in the Ohio constitution prohibits a tax on the "privilege of doing business" in the state.

But, if you read the overview provided in the link above, you can see just how complicated the tax is.  This basically amounts to a consuption tax, but rather than let the people see the tax, they hide it by taxing the businesses based on their productivity.  Either way, Ohio now has this along side an income tax and the result is the same as if it were a type of "Fair Tax."

It is an interesting concept, but I'm opposed to the CAT. 

Best,
Robert A. Franco
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