As with the flat tax, NST proponents want to simplify the revenue system and promote savings and investment. They argue that this would save hundreds of billions of dollars now spent each year by businesses on the costs of tax-code compliance. They also argue that the NST would collect revenues from everyone who benefits from government services in the country, including illegal aliens who do not now pay income taxes.

Any proposal that would eliminate taxes on investment income could have a radical effect on the value of affluent individuals’ portfolios. “Most high-net-worth portfolios carry a lot of municipal bonds,” says C. Joseph Ramos, president of Private Consulting Group in Larkspur, Calif. “Under an NST, they could lose up to 20 percent of their value overnight.” Ramos notes that investors would quickly switch to higher-yielding corporate bonds, leaving the municipal issues to languish. He also believes that the elimination of the mortgage interest deduction could adversely affect investments such as real estate.