Huckabee campaigning for 23% sales tax

The Los Angeles Times ^ | December 24, 2007 | Janet Hook

[Alex Murphy]

WASHINGTON — Mike Huckabee, one of the most conservative Republicans in the 2008 presidential race, has embraced one of the most radical ideas on the campaign trail: a plan to abolish all federal income and payroll taxes and replace them with a single 23% national sales tax.

The idea -- dubbed the "fair tax" by proponents -- has been a political asset for Huckabee; its well-organized backers have helped catapult him from the back of the presidential pack to its top tier.

Sales tax proponents have tapped into seething voter hostility toward the Internal Revenue Service to become a below-the-radar political force, popping up at campaign events and candidate forums in Iowa and elsewhere.

The efforts on Huckabee's behalf by sales tax advocates helped spur his surprise second-place showing in an August Iowa straw poll -- the breakthrough that marked the beginning of his rise in the state and nationwide.

He is the only major presidential candidate to make the idea central to his campaign. "The first thing I'd love to do as president: Put a 'going out of business' sign on the Internal Revenue Service," he said at one debate.

Some wonder, however, whether his embrace of the plan eventually could turn into a liability.

The sales tax proposal has been around for years but languished on the fringes of practical politics and policy. Tax professionals generally regard the idea as impractical, regressive and even "crackpot," as one critic puts it.

It has gone nowhere in Congress. The 2005 Presidential Advisory Panel on Federal Tax Reform soundly rejected the idea. And many politicians shy away from it because it is easy for opponents to portray it as a huge tax increase -- as Democrats did in a 2006 Senate race in South Carolina.

[newzjunkey]

The fair tax would abolish all these taxes

That's a pure pipe dream.

States are not going to give up their income taxes, property taxes, tourist taxes, sales taxes.

23% might be acceptable in AK or Montana where there's no sales tax but in CA, for example, it'd be up to 31% at the cash register.

[SAJ]

Sure. The Regress always keep their word and scrupulously obey the statutes and the Constitution.

Sure they do. Right. Uh-huh. All other Fed taxes will just go away. You've got the Regress' word for that, eh?

In a pig's eye.

[Always Right]

I just realized this ‘fair tax’ business is big ‘screw’ time for me. I recently retired and pay nearly nothing in fed taxes anymore. Nothing. It’s a secret/good planning. So this tax is a major screwing for me.

You are absolutely correct. That's my problem with FairTax advocates, instead of admitting people like you will be hurt, like you obviously will be, they lie and spin and try to convince you that you will be better off. Some people will make out and some won't. A retiree who now has tax-free income gets a royal screwing under the fair tax. No amount of spinning changes that.

[rabscuttle385]

It is a strong incentive to buy nothing

...and a strong incentive to make it yourself.

There is only one way out: the Federals must reduce spending by shrinking back to their roles as delimited in the Constitution.

Sales taxes restrict commerce just as easily as easily as income and payroll taxes restrain productivity. And by holding back either, you hold back the American economy.

[savedbygrace]

Name any other sales tax that is calculated as tax inclusive.

The FT org says the reason for doing this is so people can compare, but no comparisons can be made because there are several tax rates, and a person’s income is not an indication of their retail spending. Plus there is no way to know for certain what impact, if any, the FT would have on retail pricing. The best that can be done is to guess.

So, that excuse is a bunch of hooey. There has to be an underlying reason for calculating it as tax inclusive, when NO OTHER SALES TAXES are calculated as tax inclusive. It isn’t a leap to conclude it is being done in order to make it appear to be a lower percentage than it, as a sales tax, really is, because ALL SALES TAXES are calculated as TAX EXCLUSIVE, except the so-called Fair Tax.

If FTers can’t be honest about this one little thing, they can’t be trusted in anything. That’s the point you guys are missing. Trustworthiness. If you want people to be convinced the FT would be better than the current system of abuse, then you have to start with trustworthiness. So far, FTers haven’t.

[topfile]

They just need time. Change is hard for some people, even freepers.

[RobFromGa]

DEBUNKING THE FairTax:
A Fair Question about Fair Tax
OPEN LETTER TO BOORTZ/LINDER (FairTax)
JORGENSON EXPLODES FAIRTAX MYTH (FR Exclusive)
MONEY finds flaw in 'FairTax' bestseller [FairTax myth busted by major magazine]Fair Tax - Straightening Out Some Confusion
FAIR TAX BOOK- 2nd Ed. Revisions
A FAIRTAX PRIMER
President's Advisory Panel on Tax Reform Final Report- Nov 2005 : Chapter 9
Fair Tax, Foul Politics [NRO on FairTax]
Fair Tax, Flawed Tax (Bartlett, WSJ)

What Will Happen Under a FairTax?

WAGES: It has been made clear by many proponents of the FairTax that they are expecting 100% of their current gross pay, and that many employer/employee wage relationships, including those for government workers are controlled by contract. So, we'll assume every wage earner gets to keep 100% of their current gross pay. Everyone can figure out for him or herself what that gives them in terms of a take-home pay increase.

BUSINESS COSTS: If we assume that businesses get to keep their half of the payroll taxes (7.65% of all payroll costs up to first $95k per employee), plus taxes on corporate profits (average <2% of Cost of Goods sold) and some tax compliance savings (being generous we'll call this 1% savings), this gives the business about 8% of cost savings with which to potentially reduce prices.

PRICES: For domestic goods, if we assume that the entire 8% is passed along to the consumer, this means that pre-tax prices will be 92% of present day prices. That $10 twelve pack will now be $9.20. Of course, the twelve pack of imported beer is still $10 pre-tax. Once the 30% FairTax is added, the price of the domestic beer will be $11.96 and the price of the imported beer will be $13.00 even. So, domestic prices will go up about 20% and imported item prices will go up about 30%.

GOVERNMENT EXPENSES: Since the government expects this plan to enable them to purchase the same things they purchase now, they will need to raise sufficient revenue in order to achieve purchasing power parity. Since they will be paying the 30% FairTax on every item, we can assume that for stuff they buy, they will see the same 20% price increase on domestic items and 30% increase on imported items as other end consumers. So they will need to increase their dollar intake by this 20%+ to enable them to buy the same amount of stuff. And, of course all government salaries will have the 30% FairTax paid on the salary, less the employer half of the payroll taxes, so this is a net 22.35% increase in the cost of the entire payroll of the US government (and states too, but that is another can of worms).

ENTITLEMENT COSTS: Since the social security payments are linked to CPI, when this 20%+ price rise slams through the economy all the social security checks will have to be raised to cover this massive FairTax caused inflation. They will rise by at least 20%, and a litle more because the basket of goods will include some imported items like oil. Medicare/medical expenses will have the FairTax added, for a 20%+ increase.

GOVERNMENT PURCHASING POWER PARITY: with the cost of Payroll, plus everything they buy, plus the entitlements, all going up 20% plus we can assume that the governement will need to collect approximately 20%+ more of the new inflated dollars in order to buy what they are today with today's more stable dollars.

FAIR TAX RATE: Assuming nothing else changes regarding purchasing behavior, size of the government, etc. this means that the 30% FairTax would need to immediately raised 20% (to 36%) just to bring in all the inflated dollars that are required to fund the govt at present level. The price of domestic beer is now $12.50 and the import is $13.60. This assumes no evasion and no reduction in spending by consumers on new goods and services when the large sales tax is imposed. (an unrealistic assumption by the FairTaxers)

SAVED MONEY: All dollars that are post-tax savings would be devalued by the FairTax inflation by 20% in terms of what they can buy with their hard-earned and saved after-tax money.

Does this sound like a utopia to anyone? Isn't it very likely that a 36% sales tax (or much higher like 50%) will cause consumption to suffer and/or transactions driven into a barter system or the black market where they cannot be taxed. And every dollar that is taken from the legitimate economy is another increase that is needed in the FairTax rate in order to feed the government the amount of money it needs.

Isn't is likely that we will end up with an income tax again on top of the FairTax when this all plays out?

And once people either stop buying, or buy used, or barter for services, or buy on the black market, or funnel purchases through their businesses for a tax exemption, it is very likely that the FairTax inclusive rate would be 33%-- which is an exclusive rate of 50%, making the problem worse.

What will the Real FairTax Rate Be? [Hint: much higher than the 29.87% they claim]

The FairTax plan makes the false ASSUMPTION that 23% inclusive will be enough to fully find the government at today's level.

FairTaxers generally agree that the FairTax will cause higher prices and FairTaxers think that these will be ok because the purchasing power is what matters. Wage earners will receive a pay increase with their 100% paychecks to compensate for the higher prices.

Domestic prices will rise about 18-25% after a small (max 8%) price cut and then the 30% FairTax is added-- and rise the full 30% for foreign items.

Stick with me here for just one more minute. The government will also need a "raise" to pay the higher prices (because the government pays the FairTax on everything too), and it will take the form of additional revenue that needs to be raised. That additional revenue can ONLY be raised by increasing the FairTax rate, there is no other source to generate revenue. So, the 23% rate when multiplied by 1.18 is now 27.1% inclusive, which is 37.2% exclusive.

And that assumes no reduction in the base. If we assume just the very minimum that the base reduces 8% due to reduction in shelf prices-- ie. no reduction in unit volume of sales, just an 8% lower price for everything, then we need to divide the 27.1% by 0.92 to get a new inclusive rate of 29.5%, which is 41.8% exclusive. And this assumes ZERO evasion, and the same exact level of unit sales as now.

Most recently the FairTax commission found that the FairTax Rate was grossly understated by the FairTax people and that the actual rate would have to be MUCH HIGHER than 29.87% exclusive due to 1)government paying itself tax and 2) erosion of the taxable base due to all factors. Just a 15% erosion in base, coupled with a Federal government costing 20% more than presently (the cost with the FairTax added) makes the rate 33% inclusive which is 50% exclusive.

The FairTax people need to go back to the drawing board and plug in the new reality where prices go up 18-25% and stick that in their models and see what somes out the other side. It won't be pretty is my expectation.

OK, FairTax opponent, if you're so smart, what do you think we should do to fix the problem?

I want to see elimination of corporate taxes, elimination of death taxes, additional reductions in the marginal income tax rates until we find that we are the Laffer optimal point.

In addition I want to see Social Security privatized, and I am willing to pay extra money to pay for those who were promised this benefit, and never receive a penny of it myself. I also want to see Medicare reformed from top-to-bottom. I also want to see Tort Reform to reduce the exorbitant costs of insurance on our medical costs. And we need to reduce the scope of the Federal Government to its constitutionally mandated responsibilities and get rid of the rest. The Golden Goose that is America is way too fat and needs to be put on a severe diet.

These are what we need to do, incremental improvements in what we already have. This is already working and we should keep at it...even Boortz seems to think so. Boortz (9/20): "...the economy continues to go like gangbusters. We are right in the middle of an historic economic boom. Don't let the mainstream media or the Democrats tell you otherwise...we've never had it so good...

[newzjunkey]

It's simple. You trust your government more than they (we?) do.

Repeal the 16th amendment first. Then we can talk about the "fair tax" system.

Given how they've scammed the enforcement of borders and immigration laws, I think we can safely assume they'd find a way to do both the income and sales tax on the federal level.

[topfile]

One of the fundamental requirements of the fair tax is to repeal the income-tax. Your likely not aware that this is a talking point of the fair tax opponents and is used often. I don’t believe anyone would sit still for both. This is still a republic you know.

[Always Right]

If FTers can’t be honest about this one little thing, they can’t be trusted in anything.

And FTers have a long history about being dishonest with a lot of things, and not just the misleading way they quote their rate. They have been misusing their statistics for over a decade about the embedded taxes. The fairtax also grossly overestimates its revenue because much of the 'revenue' the fairtax gets comes from government taxing itself. You can't generate revenue by taxing yourself, but the fairtax does.

[Bigun]

Repeal the 16th amendment first. Then we can talk about the "fair tax" system.

I don't know of a single Fairtax supporter who does not also support the repeal of the 16th amendment but, as a practical matter, HOW would you propose getting that done without first having in place a working replacement tax system?

[mylife]

Are you aware that with the current system your paying over 40% Thought not.

Is that all? I would have thought it was closer to 48%

I don need to read Boortz's book to know that a tax on consumption will slow spending.

A flat tax makes more sense than a 23% tax on goods.

[unixfox]

There are just too many people benefiting from our current tax structure to get rid of it...

Those would be called POLITICIANS. They use it to buy votes and control the masses.

[zeaal]

Fair Tax? Flat Tax?

I think the problem with the Fair Tax of 23% sales tax will be two fold ... first depending on vendors to not only collect but remit the sales tax and second, I think a strong barter system will develop to avoid paying 23%.

[wayoverthehill]

Your figures are wrong.

If you work for someone else, you pay 6.2% of your income in FICA taxes PLUS 1.45% for Medicare, or a total of 7.65% up to 97,500.

Individuals do not pay for unemployment insurance. Furthermore, the rate employers pay for UI is nowhere near 6.2%. In Texas, for instance, the highest rate is 2.7% and that is for new businesses with no past history of claims. If you have no claims, your rate goes down after a while.

[savedbygrace]

You and I agree 100% on all this, and we have for a long time.

My business is 100% service. That means that under the FT I would have to increase my rates by about 30% or lose income. No matter what FTers want to call it, that feels very much like an income tax to me.

I wouldn’t argue it from a definitional viewpoint, but from an effect POV. It seems to have the effect of taxing my income.

[Bigun]

The FairTax Rate: a 23% tomato or a 30% tomato?

[Principled]

If a principle argument of yours is something along the lines that, ''We define rates just like the IRS ...

It is not an argument of mine. Mine is to use both rates, depending on usage. I have no problem using either.

[glmjr]

Democratic Governor Endorses Mike Huckabee

Instead we have conservatives lining up behind Mike Huckabee because he agrees with them on two issues - gay marriage and abortion - neither of which the president can do much about. And all the while they ignore his liberal history as governor of Arkansas. If Huckabee is a real conservative, explain this: Since he's running in the Republican primaries for president, don't expect Mike Huckabee to be advertising the strong endorsement he just got from Ted Strickland, Ohio's Democratic governor.

It seems Mr. Strickland, who typically racked up a 95% rating from the liberal Americans for Democratic Action during his 16 years in Congress, has discovered a kindred spirit in Mr. Huckabee. He told the Cincinnati Enquirer last Sunday that Mr. Huckabee is a "combination of conservative views in some ways, but very, almost liberal views in other ways." Mr. Strickland concluded: "Of all the Republican candidates, Mr. Huckabee would be my personal choice."

NOW,,, THERE SHOULD BE NOT DOUBT IN YOUR MIND....HUCKABEE IS LOVED BY DEMOCRATS.

God save us if he is actually nominated by the Republican party, or should I say "former" Republican party ..if that actually occurs. 

YOUR CHOICE                           This                         OR                                   This. 

                                                        

NEITHER IS A PRETTY PICTURE

[glmjr]

     Can you really imagine this bunch in the White House? 

 

        HEEHAW, HEEHAW
Hey mom...what's for super? Pedro is back. He slipped over the border  yesterday, do you think we can get Maria to cook up some her fine tacos?

 I would rather vote for a Democrat than that....more government involvement...amnesty pushing... foreign affairs ignorant......Bush bashing....high taxing....parole giving...credential lying.....preacher hick from Arkansas. That's about it (sure I missed something)

Karl Rove might be right when he said to get ready for a Democratic era in the White House.  A vote for Huckabee is a vote for a Democrat, no matter which party wins.