Mike Huckabee ought to take a solemn oath never to answer another question about taxes unless it is about his own and he can show his tax returns. He has shot another big hole in his leaky presidential lifeboat by wildly extolling a thing called the FairTax, promising to get it installed as soon as he gets to the White House.
The nutty proposition, which has been around a dozen years, is to slap a massive new sales tax on every transaction in America, from your groceries to your medical bills to the collection-plate offering on Sunday morning. Nothing would be exempt — for consumers, that is; everything would be exempt for business transactions. This is how Huckabee would pay for practically everything the government does, from making war to paying pensions and medicine for the elderly. Income and payroll taxes for individuals and businesses would be abolished.
To Huckabee it sounded like an idea that would excite every American — April 15 would be just another pretty spring day, he beamed — and if you’re rich enough it probably does sound wonderful. The richest one percent of Americans would just about cease paying taxes.
But when Huckabee and two other right-wing Republican candidates — Tom Tancredo and Duncan Hunter — embraced it in the debates the ridicule came in palpable heaps. Even the Arkansas Democrat Gazette, ordinarily a cheerleader for the former governor, wondered whether he had totally lost his wits.
Huckabee has never had a grasp of how taxes work. When he took office in 1996 and the legislature was pondering his predecessor’s proposal to cut income taxes for working people Huckabee proposed just sending everyone a small government check each fall, just before the election in even years. Legislators scoffed at his idea and passed Jim Guy Tucker’s income tax cut. Huckabee signed it and has since claimed it as his own, along with 94 other “tax cuts” passed when he was governor. To the extent that the others were real tax cuts — most were tiny tax breaks for special interests — they were Democratic tax cuts that he simply did not veto.
On the presidential hustings and away from home, Huckabee claims to be a tax-cutting demon, the first and biggest in Arkansas history. As everyone at home knows, many Arkansas governors cut taxes and many raised them, but Huckabee was the biggest taxer and spender in history. The taxes were for good causes but they were still taxes.
The FairTax is a fraud of another magnitude. Americans for Fair Taxation (of Rich People) came up with the name for the relief program for the super wealthy after PR genius Frank Luntz had so much success with calling inheritance taxes the Death Tax.
First introduced in Congress in the Clinton years, the FairTax claims to impose a national sales tax of 23 percent, which would replace all income, payroll, self-employment, gift and inheritance taxes. The Internal Revenue Service would be abolished. Americans for Fair Taxation claims that the 23 percent rate would exactly replace all the current taxes so that no government program would be cut one dime.
To make it a little fairer, the government would send a small check on the first of every month to every citizen family (no aliens) for the estimated amount that a poverty-level family would be apt to pay in taxes for food, clothing and medicine in a month.
As Huckabee extolled it, nearly every American would wind up paying fewer taxes. When something sounds too good to be true, it invariably is.
The FairTax starts with a little sleight of hand. Twenty-three percent actually is 30 percent. The tax would be 30 cents on each $1 of purchase. But the outfit says that the 30 cents is only 23 percent of the price of the purchase including the tax: $1.30. No one else calculates tax rates like that, but Huckabee liked it, if he understood it.
Independent analysts, such as President Bush’s Advisory Panel on Federal Tax Reform and the Institute on Taxation and Economic Policy, calculate that the 23 percent tax would not come close to funding present government services. The ITEP figured that the tax would have to be at least 45 percent now and close to 60 percent in a few years when baby boomers begin retiring, and that assumes that no one would try to duck paying the tax.
A free lunch for everyone? The ITEP did a simulation of the FairTax bill if it were adopted today. Taxes would be raised an average of $3,200 a year for the bottom 80 percent of taxpayers nationwide. The next richest 15 percent would pay slightly less than they do now in income and payroll taxes and the next richest 4 percent would pay an average of $14,000 less a year.
The richest 1 percent — that’s you, right? — would get an annual tax cut of $227,000 a year apiece.
To enforce compliance the government would need a bureaucracy at least as big and intrusive as the IRS. For millions of people, April 15 would come on the first of every month.
From now on, the governor should treat tax questions as a chance to talk about his weight loss.