The below study (in boldface type) gives a very enlightening look at the legal issues involved with implementing a national sales tax as a substitute for the income tax we now have.  

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                 AMERICAN CONSTITUTIONAL RESEARCH SERVICE
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ISSUE BRIEF:  THE NATIONAL SALES TAX HOAX
Author:  John William Kurowski

Transcribed to ASCII by the Legislative Exchange Association, Drafting,
Editing and Research Service (LEADERS), P.O. Box 3245; Frederick, MD  21705
301-293-0001, E-Mail to: FrenchyG@AOL.COM

     There is an important distinction to be made concerning a "national
sales tax" as proposed to replace current taxation, and the method of taxing
consumption as intended by the Founding Fathers. A national sales tax would
give Congress an across the board percentage of our economy by laying an
internal tax, whether such revenue is needed or not. The Founder's method of
taxing consumption began with an external tax on imports at our water's edge,
and was extended to reach internal consumption only if external taxation were
found insufficient.

      It is important to study our nation's first revenue raising Act to
understand the wisdom of the Framers. The Act was "... in a certain sense a
second Declaration of independence; and by a coincidence which could not have
been more striking or significant, it was approved by President Washington on
the fourth day of July, 1789." [See, Twenty Years of Congress, James G.
Blaine, 1884, Vol. 1, page 185]

       Madison, in discussing this Act before Congress, clearly pointed out a
very important principal of American's original tax reform package:

       "...a national revenue must be obtained; but the system must be such a
one, that, while it secures the object of revenue it shall not be oppressive
to our constituents."

      The Act imposed taxes, not on American constituents, but on "goods wares
and merchandise" imported into our Country by foreign nations, and not one
dime was raised under the Act by any internal taxes.  Internal taxes were
frowned upon by the Founder's especially when a national revenue could be had
by requiring foreign nations to pay for the privilege of doing business on
American's soil!

    Jefferson, in his Second Annual Message(December 15, 1802) states:
 
     "In the department of finance it is with pleasure I inform you that the
receipts of external duties for the last twelve months have exceeded those of
any former year, and that the ratio of increase has been also greater than
usual.  This has enabled us to answer all the regular exigencies of
government, to pay from the treasury in one year upward of eight millions of
dollars, principal and interest, of the public debt, exclusive of upward of
one million paid by the sale of bank stock, and making in the whole a
reduction of nearly five millions and a half of principal; and to have now in
the treasury four millions and a half of dollars, which are in a course of
application to a further discharge of debt and current demands."

Imagine...all this in consequence of "external duties!"

     In Jefferson's Second Inaugural Address (March 4, 1805), he points out:

     "At home, fellow citizens, you best know whether we have done well or
ill.  The suppression of unnecessary offices, of useless establishments and
expenses, enabled us to discontinue our internal taxes.  These covering our
land with officers, and opening our doors to their intrusions, had already
begun that process of domiciliary vexation which, once entered, is scarcely to
be restrained from reaching successively every article of produce and
property.  If among these taxes some minor ones fell which had not been
inconvenient, it was because their amount would not have paid the officers who
collected them, and because, if they had any merit, the state authorities
might adopt them, instead of others less approved."
     "The remaining revenue on the consumption of foreign articles, is paid
cheerfully by those who can afford to add foreign luxuries to domestic
comforts, being collected on our seaboards and frontiers only, and
incorporated with the transactions of our mercantile citizens, it may be the
pleasure and pride of an American to ask, "what farmer, what mechanic, what
laborer, ever sees a tax-gatherer of the United States?"

     The national sales tax idea would do ill to our nation as it is an
internal system of taxation which ultimately increases the cost of goods
manufactured on American soil; burdens the American Citizen in its collection;
and, is to be paid BY the farmer, mechanic, laborer, etc. who will continue to
see the intrusion of the "tax gatherer of the United States" if such a system
is adopted!

     It is also important to note how imposts and duties (external taxation)
were successfully used to encourage domestic manufacturing and assist in
building a strong industrial base.  The first revenue raising Act imposed an
across-the-board tax on imports which was higher for imports shipped in
foreign owned foreign built vessels, and discounted the tax for imports
arriving in American owned American built ships:

     "a discount of ten percent on all duties imposed by this Act shall be
allowed on such goods, wares, and merchandise as shall be imported in vessels
built in the United States, and wholly the property of a citizen or citizens
thereof."

     This skillful use of external taxation gave American ship builders a
hometown advantage and predictably resulted in America's merchant marine
becoming the most powerful on the face of the planet.  In addition, our
national treasury was filled by foreigners paying for the privilege of doing
business on American soil.

     But this was when members of Congress, and those running for Office, put
American interests first and would have considered NAFTA, GATT and the WTO as
acts of sedition, and would have tarred and feathered those promoting such
surrender of America's soverignity.

     A national sales tax plan which omits external taxation as a principal
source to fill our national treasury, is in fact a surrender of national
sovereignty to the advantage of foreign interests!

     It is quite obvious the American People are fed up with the manner in
which Congress now raises its revenue, and the system will be changed...one
way or another.  But if income taxation is abandoned and the Founders original
tax plan is returned to, including the use of impost and duties at our water's
edge as a principal means to fill our national treasury, a powerful group of
international financiers and investors will have their gravy train cut off.
Perhaps that is why a flat tax along with a national sales tax has been
offered as "tax reform" by the establishment ... each proposal cleverly
perpetuates a burdensome system of internal taxation as the principal means to
raise revenue, and leaves the international gravy train in tact by not
resorting to external taxation to meet the expenses of Congress as was
intended by the Founders!

     In closing, many of the same people who promoted the NAFTA, GATT and the
WTO (the free trade crowd) are now promoting various forms of tax reform ...
each proposal cleverly maintaining internal taxation as a principal means to
raise a national revenue.  Let us continually keep in mind the important
distinction between internal and external taxation while working toward the
elimination of income taxation and strive to return to the Founding Father's
original tax preform package which provided the means allowing America to
become the economic envy of the world.

                   Statement of John William Kurowski
                              Founder Of The
                 American Constitutional Research Service
                                Before the
                        Committee on Ways and Means
                  United States House of Representatives

                                 June 1995

Mr. Chairman and Members of this Committee:

     The subject of tax reform was extensively debated by the Founders of our
country.  I do not know if other participants in these Hearings have take the
time to research the accounts of these historical debates when formulating the
suggestions they will present to this Committee, but, having researched the
Founders' original tax reform package, I am inclined to believe its
fundamental principals are as valid today as when they were put into practice
over two hundred years ago.

     Our nation's first revenue raising Act was "...in a certain sense a
second Declaration of Independence; and by a coincidence which could not have
been more striking or more significant, it was approved by President
Washington on the fourth day of July, 1789."  [See, Twenty Years of Congress,
James G. Blaine, 1884, Vol. 1, page 185]

     James Madison, in discussing this Act before Congress identified a
fundamental principal concerning the power delegated to Congress to lay and
collect taxes:

          "...a national revenue must be obtained; but the system must be
     such a one, that, while it secures the object of revenue it shall not be
     oppressive to our constituents."

     The Act went on to imposed taxes, not on Congress' constituents, but on
specific "goods, wares, and merchandise, imported into the United States", and
not one dime was raised under the Act by internal taxation!  Internal taxes
were frowned upon by the Founders, especially when a national revenue could be
had by requiring foreigners to pay for the privilege of doing business on
American soil!

     Jefferson, in his Second Annual Message (December 15, 1802) states:

          "In the department of finance it is with pleasure I inform you
     that the receipts of external duties for the last twelve months have
     exceeded those of any former year, and that the ratio of increase has
     been also greater than usual.  This has enabled us to answer all the
     regular exigencies of government, to pay from the treasury in one year
     upward of eight millions of dollars, principal and interest, of the
     public debt, exclusive of upward of one million paid by the sale of bank
     stock, and making in the whole a reduction of nearly five millions and a
     half of principal; and to have now in the treasury four millions and a
     half of dollars, which are in a course of application to a further
     discharge of debt and current demands." [emphasis added]

Imagine...all this in consequence of "external duties"!

     In Jefferson's Second Inaugural Address (March 4, 1805, he points out:

          "At home, fellow citizens, you best know whether we have done well
     or ill.  The suppression of unnecessary offices, of useless
     establishments and expenses, enabled us to discontinue our internal
     taxes.  These covering our land with officers, and opening our doors to
     their intrusions, had already begun that process of domiciliary vexation
     which, once entered, is scarcely to be restrained from reaching
     successively every article of produce and property...

          "The remaining revenue on the consumption of foreign articles, is
     paid cheerfully by those who can afford to add foreign luxuries to
     domestic comforts, being collected on our seaboards and frontiers only,
     and incorporated with the transactions of our mercantile citizens, it
     may be the pleasure and pride of an American to ask, what farmer, what
     mechanic, what laborer, ever sees a tax-gatherer of the United States?"
     [emphasis added]

     Although the national sales tax proposals appear to be somewhat fairer
than existing taxation, each would do ill to our nation as they are all based
upon internal taxation, which would ultimately increases the cost of goods
manufactured on American soil; burden the American Citizen in its collection;
and, are to be paid by the "farmer, mechanic, laborer", etc., who will
continue to see the intrusion of the "tax-gatherer of the United States" if
such a system is adopted!

     In view of the undesirable effects of an internal national sales tax,
perhaps it is wise to further study the Founder's plan and learn how imposts
and duties (external taxation) were successfully used to fill the national
treasury, encourage domestic manufacturing and assist in building a strong
industrial base.

     In addition to imposing a specific amount of tax on specific articles of
consumption imported, the first revenue raising Act also imposed an across-
the-board tax on imports which was higher for imports shipped in foreign owned
foreign built vessels, and discounted the tax for imports arriving in American
owned American built ships:

     "...a discount of ten percent on all duties imposed by this Act
     shall be allowed on such goods, wares, and merchandise as shall be
     imported in vessels built in the United States, and wholly the
     property of a citizen or citizens thereof."

     This patriotic and skillful use of external taxation not only filled our
national treasury, but gave American ship builders a hometown advantage and
predictably resulted in America's merchant marine becoming the most powerful
on the face of the planet.  Unfortunately, today when I visit the docks in New
York's Hell's Kitchen area, I am saddened that I can no longer read the names
on the docked ships as they all seem to now be foreign owned foreign built
vessels...an irrefutable sign of America's decline traceable to the acceptance
of thirty pieces of silver.

     Yes, there was a day when our national treasury was gladly filled by
foreigners paying for the opportunity to do business on American soil.  But
this was when members of Congress, and those running for Office, put American
interests first and would have considered the NAFTA, GATT and the WTO as acts
of sedition, and would have tarred and feathered those participating in the
surrender of America's sovereignty.

     A national sales tax plan which omits external taxation is a principal
source to fill our national treasury, is in fact a surrender of national
sovereignty to the advantage of foreign interests!

A Second Source To Fill The Treasury

     Having identified imposts and duties (external taxes) as being the
Founder's intended primary source to fill our national treasury, I will now
turn to their intended internal consumption tax plan.

     An across the board national sales tax would unquestionably increase the
cost of production on American soil, as previously pointed out.  To avoid
this, and other unwanted effects of an across the board national sales tax,
common sense dictates we must exclude from the list of taxable items, tools of
production, supplies necessary to conduct business, services needed to sustain
business, and the necessities of life (food, shelter, clothing, medical
expenses) i.e. all those items which makes labor possible must also be
excluded.

     In simple language, a consumption tax plan ought to be limited to
articles of luxury, and each article must be individually selected by Congress
and the appropriate amount of tax must be determined for each specific item
chose, just as was done in the first revenue Act of our country!

     By limiting the tax to articles of luxury, and requiring each article to
be specifically chosen and the appropriate amount of tax determined by
Congress, a self regulating check and balance is imposed upon Congress.  If
Congress does its job properly and the nation as a whole is productive and
prosperous, the purchase of articles of luxury will undoubtedly increase, and
with it, the flow of revenue into the common treasury!  But, if Congress'
policies become burdensome and its regulatory requirements upon business,
industry and our nation's labor force inhibit a hearty economy, or any
particular article is excessively taxed, the first sign would be in a decline
in the flow of revenue into the national treasury!

     Thus, the free market place determines the limit of taxation under the
Founder's internal consumption tax plan, and it establishes a self regulating
gauge beyond the reach of Congress' manipulation!

     As Hamilton said, in regard to taxes on consumption, they:

     "... may be compared to a fluid, which will in time find its level
     with the means of paying them.  The amount to be contributed by
     each citizen will in a degree be by his own option, and can be
     regulated by an attention to his own resources.  The rich may be
     extravagant, the poor can be frugal; and private oppression may
     always be avoided by judicious selection of objects proper for
     such impositions ... It is a signal advantage of taxes on articles
     of consumption that they contain in their own nature a security
     against excess.  They prescribe their own limit, which can not be
     exceeded without defeating the end proposed  that is, an extension
     of the revenue." [No. 21 of the Federalist, emphasis added.]

Balancing the Budget

     Still one more question remains to be answered: what is to be done if
insufficient revenue is raised from external and internal taxes on
consumption?

     Once again the Founder's plan shines bright above all contemporary
suggestions.  Careful research into our Nation's early legislative history
reveals the Framers did in fact provide Congress with an emergency power to be
used if deficits should arise.  And the wisdom of the Framer's method, unlike
the proposed balanced budget amendment (S.J. RES.1), contains a brilliant
mechanism which would abruptly end Congress' current profligate spending
habits!

     Under the Framer's plan, whenever the monies arising from Congress'
normal taxing powers (imposts duties and excises) are found insufficient to
fund federal expenditures during a fiscal year, and a deficit is produced by
Congress borrowing to finance expenditures, Congress must then use its direct
taxing power at the beginning of next fiscal year to raise an amount
sufficient to retire this deficit.

     Congress is required to follow the rules of apportionment when imposing
this tax, and bills each state for a share of the deficit.  Each State must
contribute a share of the total deficit in proportion to its allotted number
of Representatives as set forth in Article I, Section 2, clause 3, of the
United Constitution.  The more votes a State exercises in the House, the
larger is its share toward extinguishing a deficit . . . representation with
proportional obligation!

     The chart below is based on a total House membership of 435:

STATE          NO. OF REPRESENTATIVES        SHARE OF DEFICIT

NEW YORK              31                        31/435's
MARYLAND               8                         8/435's
CALIFORNIA            52                        52/435's
IDAHO                  2                         2/435's
FLORIDA               23                        23/435's
etc..............................................................

FOUNDING FATHERS' FAIR SHARE FORMULA

     The states are left free to raise their share of the tax in their own
way, within a time period set by Congress.  But if any state shall neglect to
pay its share, then Congress must send forth its officers to assess and levy
that state's apportioned share, together with interest thereon.

Legislative History

     This method of extinguishing deficits appears in seven of the
ratification documents which gave life to the United States Constitution.  The
first emergency direct tax was imposed in 1798, to extinguish part of the
Revolutionary War debt.  It was later used during the War of 1812, and also to
extinguish deficits during the Civil War.

     The Sixteenth Amendment to the United States Constitution did not repeal
or alter Congress' power, or obligation, to impose the emergency direct tax
should a deficit arise.  The power of Congress to impose a direct tax still
exists, and direct taxes are still required to be apportioned among the
states, as pointed out by the United States Supreme Court [see Stanton v.
Baltic Mining Co., 240 U.S. 103, 103, (1916; Eisner v. Macomber, 252 U.S. 189
(1920); and, Bromely v. McCaughn, 280 U.S. 124 (1929).  Also see Congressional
Research Service Report No. 84-168 A 784/275, which was updated September 26,
1984].

Big Advantages

     There is no smoke and mirrors with the 'FAIR-SHARE' method of balancing
the budget.  The emergency direct tax is required to be imposed whenever
Congress closes a fiscal year with a deficit.  The structural mechanism which
would immediately bring fiscal sanity to Congress is the requirement of having
Congress send a bill to the governor of each state, notifying him to remit his
state's apportioned share toward extinguishing the deficit created during the
year by Congress; the governors and state legislators being left with the
burden of having to raise this money, and to send it off to Washington, D.C.

     Picture, for a moment, the expression on the faces of the Governor of
New York and the New York State Legislature, if New York should receive a bill
for its apportioned share [31/435] of the 1995 federal deficit.  This threat
would create a compelling incentive for the Governor of each state, and the
various state legislatures, to keep a jealous eye on the spending habits of
their Congressional Delegation . . . it would require the fiscal
accountability which the state governments once demanded from their Senate and
House Members!

     In addition, because each state's share of the tax burden is determined
by a fixed rule, similar to that which determines the House membership size of
each state, a barrier is erected preventing the kind of mischief which
Congress now practices, i.e., discriminatory tax legislation; pork-barrel
favoritism; special interest lobbying, etc.

Bottom Line

     The Framers of the Constitution provided a specific method to extinguish
anticipated deficits through an emergency direct tax.  Hamilton, in No. 36 of
The Federalist Papers, reminds us:

          "Let it be recollected that the proportion of these taxes is
     not to be left to the discretion of the national legislature, but
     is to be determined by the number of each State, as described in
     the second section of first article [United States Constitution].
     An actual census or enumeration of the people must furnish a rule,
     a circumstance which effectively shuts the door to partiality or
     oppression.  The abuse of this power of taxation seems to have
     been provided against with guarded circumspection."  (EMPHASIS
     ADDED)

     The rule of apportionment was written into our constitution to remedy a
major defect associated with "democracies", which Madison points out in No. 10
of The Federalist Papers:

     "... have ever been spectacles of turbulence and contention; have
     ever been found incompatible with personal security or the rights
     of property; and have in general been as short in their lives as
     they have been violent in their deaths."

     And so, the Founding Fathers formed a Constitutional Republic to avoid
the predictable disastrous consequences of democracy.

     The intended use of the emergency direct taxing power to extinguish
deficits is not only far superior to any of the proposed balanced budget
amendments being offered . . . it is already part of our Constitution.  The
method in text form is as follows:
 

                   The Fair Share Balanced Budget Method
 

                            "A R T I C L E (?)"
 

     "SECTION 1.  Congress ought not raise money by borrowing, but when the
money arising from imposts duties and excise taxes are insufficient to meet
the public exigencies, and Congress has raised money by borrowing during the
course of a fiscal year, Congress shall then lay a direct tax at the beginning
of the next fiscal year for an amount sufficient to extinguish the preceding
fiscal year's deficit, and apply the revenue so raised to extinguishing said
deficit."

     "SECTION 2.  When Congress is required to lay a direct tax in accordance
with Section 1 of this Article, Congress shall immediately calculate each
State's apportioned share of the tax based upon its number of Representatives
as allotted by the Constitution, and then notify the Executive of each State
of its apportioned share of the total tax being collected and a final date by
which said tax shall be paid into the United States Treasury."

     "SECTION 3.  Each State shall be free to assume and pay its quota of the
direct tax into the United States Treasury by the final date set by Congress,
but if any State shall refuse or neglect to pay its quota, then Congress shall
send forth its officers to assess and levy such State's proportion against the
real property within the State with interest thereon at the rate of ((?)) per
cent per annum, and against the individual owners of such property.  Provision
shall be made for a 15% discount for those States paying their share by ((?))
of the fiscal year in which the tax is laid, and a 10% discount for States
paying by the final date set by Congress, such discount being to defray the
States' cost of collection."

                               ************
 
Conclusion

     There are participants at this Hearing, and many political pundits
appearing on talk shows across our country, who are far more articulate than I
in identifying the glaring defects and dishonest nature of income taxation,
whether flat or progressive.  Likewise, there is also an abundant supply of
those presenting well rehearsed arguments against an across the board national
sales tax, and have displayed their rhetorical skills quite admirably.  But
who, I ask, has made a substantial argument against the Founding Father's
original tax reform package?

     Perhaps our only problem in regard to tax reform is that we, as a
nation, have lost touch with the original intent and wisdom of those who
framed and ratified our Constitution...such negligence culminating in our
current dilemma.

     In closing Mr. Chairman, I would like to take this time to thank you and
your staff for allowing me this opportunity to present my humble opinion on a
subject of such great importance.

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