THE VIRGINIAN-PILOT 
              Copyright (c) 1995, Landmark Communications, Inc.

DATE: Friday, June 9, 1995                   TAG: 9506080017
SECTION: FRONT                    PAGE: A18  EDITION: FINAL 
TYPE: Editorial 
                                             LENGTH: Medium:   57 lines

ROAD TO TAX REFORM BEGINS WITH A FIRST STEP A LOOK AT WAYS AND MEANS

The House Ways and Means Committee began hearings this week to consider scrapping the present tax system in favor of something new. A vote on actual legislation is a year or more away, but for good or ill this could be the biggest change to come out of the Republican revolution.

House Majority Leader Dick Armey favors a flat income tax. Sens. Sam Nunn and Pete Domenici want a less progressive tax but one that gives big incentives for investment. But Rep. Bill Archer, the Ways and Means chairman, seeks more drastic reform.

Archer wants the existing tax code ``torn out by the roots.'' He'd repeal the 16th Amendment that authorized the income tax in 1913 and replace it with a consumption or value-added tax - in effect, a national sales tax.

Many arguments against the income tax ring true. It is a nightmare of complexity. It costs billions annually to comply with the law. That includes the cost of running the IRS itself, money spent by individuals and businesses on tax accountants and attorneys and the endless man hours spent preparing returns.

Archer believes any income tax reform is doomed because Congress will undo it by writing a loophole here, an exemption there. It's far harder to tamper with a consumption tax.

Individuals would benefit by having no tax reporting to worry about. They'd pay every time they made a purchase, somewhere between 15 percent and 20 percent of the purchase price. Of course, businesses would not escape the burden of compliance under such a scheme, but the lobbying-for-loopholes industry would be out of business.

Archer says a sales tax would make the United States more competitive in trade since taxes would not be built into products sold abroad as they are now. The ability to avoid taxes would be greatly reduced, but barter and a black market could result. Finally, Archer suggests, a tax on consumption would make saving more attractive.

Some objections would need to be addressed. The poor could find themselves worse off under such a scheme. Since they have to spend every dollar they earn, their tax bill would rise. Archer says he'd be willing to ease their burden, but solving the problem could be difficult. Archer also claims a 16 percent tax would raise as much revenue as the present system, but that needs study.

Still, Archer and the other tax reformers are right to say the present system is a mess. A fix has been promised for decades. If Republicans can produce improvements, they will be welcome. But before taxpayers agree to trade in the old model on a new one, they will need to understand the practical effects clearly, who would win and who would lose. Reform of a system that raises over $1 trillion a year and affects every citizen needs to be done with great deliberation. by CNB