Monday, August 20, 2007

FairTax

Following Mike Huckabee's surprise second-place finish in the Iowa Straw Poll, I noted the influence that a group called FairTax.org had in the contest. Huckabee is the only presidential aspirant so far to have endorsed the FairTax agenda of abolishing the federal income tax, and the IRS along with it, and replacing it with a 23 percent national retail sales tax. I argued that despite the results in Ames, Iowa, identifying himself with such a radical agenda makes Huckabee a one-issue sideshow, rather than a serious candidate.

A fundamental, all-at-once overhaul of this nation's tax structure is a non-starter in the current political environment. The tax code, while always of interest to one degree or another, is simply not where the passions of Americans lie right now. At this moment in history, the American imagination is consumed with one issue: national security.

Maybe in a world where people are not literally afraid of being blown up today, tomorrow, or the next day, there would be enough room in the national consciousness for a debate about the tax structure. But if Steve Forbes couldn't make Americans feel invested in the idea of a flat tax in 1996, during the peace and prosperity of the Clinton years, Mike Huckabee cannot sell it in 2008. Frankly, he would do just as well to base his campaign on a return to the gold standard.

Even if the FairTax movement constitutes a significant portion of the GOP primary electorate, which I do not grant by any means, the general election environment is not fertile ground for any such discussion.
My August 13 post was instigated by a comment to an earlier blog entry which boasted of FairTax.org's role in helping Huckabee to secure his second-place showing. The commenter described FairTax as a "grassroots movement."

But as the Wall Street Journal reports today, FairTax is about as "grassroots" as the "movement" to abolish the federal estate tax - which is to say, not in the slightest. Like the anti-estate-tax effort, FairTax is a project birthed and nurtured by a small group of superwealthy Americans whose goal, not surprisingly, is to do away with this country's progressive tax structure and replace it with a regressive tax which leaves more of their income in their own hands.

For more than a decade, a group started among friends at Houston's River Oaks Country Club and led by construction magnate Leo Linbeck Jr. has pushed to scrap the federal income tax for a national sales tax.

[...]

To ensure the income tax never returns, the group proposes repealing the 16th Amendment that created it a century ago.

In its place would be a 23% national sales tax on goods and services though other analysts say the rate would have to be higher. Where the income tax is intended to be progressive, taking more from those with greater wealth, a consumption tax would be regressive, hitting lower-income people proportionally harder because they spend all or most income on necessities while richer people can save and invest much of theirs.

[...]

Besides Mr. Linbeck, other big donors to the group include billionaire investors T. Boone Pickens and Robert C. McNair, major Republican contributors.
If an agenda so contrary to the interests of working American families, conceived and driven by billionaires, can be described as a "grassroots movement," then that expression has no meaning. This project is no more "grassroots" than the global warming denial groups that are founded and funded by ExxonMobil.

Many of the press reports about Huckabee's second-place finish in Ames focused on the David-and-Goliath nature of his showing, versus Mitt Rommey having essentially purchased his win. Romney spent, by some estimates, $5 million on community organizing, transportation, hospitality, and tickets to the event for people who would vote for him. By contrast, the intitial press reports focused on the relative pittance, about $150 thousand, that Huckabee spent.

But as the Journal reports, just because Huckabee didn't spend a lot of his own cash, it doesn't mean money was not a factor in his second-place showing.

The underdog's finish in the Iowa straw poll behind winner Mr. Romney has raised his profile among party activists and donors -- especially since he seemed to pull it off without paying for buses, barbecue and tickets for his voters to the extent Messrs. Romney and Brownback did. But FairTax.org paid for 10 buses and 550 of the $35 tickets to vote in the straw poll -- and let supporters know that Mr. Huckabee was their ally.
Huckabee's second-place in the Iowa straw poll appears to be no different than Romney's first-place showing, except that Romney got ahead on the depth of his own pockets. Huckabee, without a personal fortune on which to draw, worked the interest group angle. He let a small, passionate group of activists know that he was on their side, and they turned out in force to support him, backed by the relatively limitless resources of a group of billionaires with an agenda.

The FairTax agenda, while potent in the microcosm of the Iowa Straw Poll, is too extreme to gain wide acceptance in either the broader GOP primary contest or the general election. If FairTax had as much of an influence on Huckabee's showing in Ames as it appears, it is unlikely that he or they will find much opportunity to capitalize on the results.

4 comments:

LeftLeaningLady said...

First I've heard of Huckabee and FairTax.org, thank you for the information. I had heard (months ago) that Ron Paul stands for the abolishment of the traditional taxation, though, and I know a lot of people (poor people) who think that is going to help them. Sad.

Ian said...

Huckabee is an adroit public speaker. He communicates his message in life-like, cogent terms, with compelling examples like the story he told (at the Ames Straw Poll) of what his then-11-yo daughter entered into the "Comments" section of a Visitors Book after visiting the Yad Vashem holocaust museum: “Why didn't somebody do something?”

Very effective. Huckabee is all about calling his listeners to "do something," to awaken them to their own empowerment, and summon them to action in order that "Main Street," and not "Wall Street," will prevail in guarding the values and beliefs upon which the Republic was founded.

Huckabee puts his listeners at ease, and reassures them, articulating clear concepts in a natural, easy style (no doubt something well-cultivated as a pastor). He’s not angry or demanding, like a Ron Paul, nor is he as “rigidly-scripted” as Romney, and his large brown eyes peer through a humble demeanor, drawing a striking contrast to a somewhat mechanical-squinty Brownback. One can easily imagine sitting comfortably with this man over a cup of coffee at the Main Street Cafe.

Most importantly, perhaps, Huckabee convinces many that he is ONE with the FairTax grassroots movement. While many - like Romney, and others, who are invested in the current income tax system - seek to demagog the well-researched FairTax plan, its acceptance in the professional / academic community continues to grow. Renown economist Laurence Kotlikoff believes that failure to enact the FairTax - choosing instead to try to "flatten" what he deems to be a non-flattenable income tax system - will eventuate into an irrevocable economic meltdown because of the hidden aspects of the current system that make political accountability impossible.

Romney's recent WEAK response to FairTax questioning on “This Week with Geo. Stephanopoulos” drew a sharper contrast between Huckabee and all other presidential front-runners who will not embrace it. Huckabee understands that what's wrong with the income tax can't be fixed with "a tap of the hammer, nor a twist of the screwdriver." That his opponents cling to the destructive Tax Code, the IRS, preserving political power of granting tax favors at continued cost to - and misery of - American families, invigorates his campaign's raison d'etre.

Of the FairTax, Huckabee asserts that it's...

• SIMPLE, easy to understand
• EFFICIENT, inexpensive to comply with and doesn't cause less-than-optimal business decisions for tax minimization purposes
• FAIR, FLAT, and FAMILY FRIENDLY, loophole-free, and everyone pays their share
• LOW TAX RATE is achieved by broad base with no exclusions
• PREDICTABLE, doesn't change, so financial planning is possible
• UNINTRUSIVE, doesn't intrude into our personal affairs or limit our liberty
• VISIBLE, not hidden from the public in tax-inflated prices or otherwise
• PRODUCTIVE, rewards - rather than penalizes - work and productivity

A detailed benefits analysis of the plan (from The FairTax Book) explains Huckabee's ardent advocacy:

FOR INDIVIDUALS:
• No more tax on income - make as much as you wish
• You receive your full paycheck - no more deductions
• You pay the tax when you buy "at retail" - not "used"
• No more double taxation (e.g. like on current Capital Gains)
• Reduction of "pre-FairTaxed" retail prices by 20%-30%
• Adding back 29.9% FairTax maintains current price levels
• FairTax would constitute 23% portion of new prices
• Every household receives a monthly check, or "pre-bate"
• "Prebate" is "advance payback" for monthly consumption to poverty level
• FairTax's "prebate" ensures progressivity, poverty protection
Finally, citizens are knowledgeable of what their tax IS
• Elimination of "parasitic" Income Tax industry
• NO MORE IRS. NO MORE FILING OF TAX RETURNS by individuals
• Those possessing illicit forms of income will ALSO pay the FairTax
• Households have more disposable income to purchase goods
• Savings is bolstered with reduction of interest rates

FOR BUSINESSES:
• Corporate income and payroll taxes revoked under FairTax
• Business compensated for collecting tax at "cash register"
• No more tax-related lawyers, lobbyists on company payrolls
No more embedded (hidden) income/payroll taxes in prices
• Reduced costs. Competition - not tax policy - drives prices
• Off-shore "tax haven" headquarters can now return to U.S
No more "favors" from politicians at expense of taxpayers
• Resources go to R&D and study of competition - not taxes
• Marketplace distortions eliminated for fair competition
• US exports increase their share of foreign markets

FOR THE COUNTRY:
• 7% - 13% economic growth projected in the first year of the FairTax
Jobs return to the U.S.
• Foreign corporations "set up shop" in the U.S.
• Tax system trends are corrected to "enlarge the pie"
• Larger economic "pie," means thinner tax rate "slices"
• Initial 23% portion of price is pressured downward as "pie"
increases
No more "closed door" tax deals by politicians and business
• FairTax sets new global standard. Other countries will follow

While passionately supporting FairTax, Huckabee understands that, if elected President, Congress will have to present the bill for his signature. His call to action goes beyond his candidacy, Main Street will have to demand that their legislators deliver the bill.

Ian said...

The Endless Stimulus Party

(Commentary) Our political and economic leaders have been providing ever greater doses of stimulants to try and prolong America's economic party. As a result, our economic system is nearing the breaking point.
May 15, 2005, 19:50

http://www.investing-news.com/artman/publish/article_845.shtml

Ian said...

Naysayers railing against the FairTax become, ipso facto, defenders of the INCOME TAX system. Prof. Larry Kotlikoff believes that the current tax system IS bringing the country to nothing less than an "economic meltdown" by virtue of the invisibility of actual taxes paid. If Americans do not understand the true cost of their government, they're unlikely to hold Congress accountable - thus the enabling mechanism to continued profligate spending.

Even with the foregoing notwithstanding, do FairTax naysayers really believe:

• Workers love having their pay confiscated, hourly, through gov't withholding and don't mind getting their money back by involuntary servitude - to the tune of 50 hours/year (on average) - preparing an annual tax return?

• That certifying the number of persons in your family (annually, and, ancillarily, upon change in household) is an abrogation of our freedom - more intrusive and complex than filing a tax return every year subject to threats and intimidation by theIRS.

• It's better to have theIRS fishing through citizens' income transactions (complete with audits, interest, penalties, and threats against individuals, families, businesses as well as confiscation of their homes, property, and bank accounts) rather than - Gawd forbid - issuing a gov't check to an individual (while pretending that Social Security payments disbursement logistics really can't work for "prebates")?

• That an monthly advance tax rebate is the same thing as "being on the dole" ? (Only lobbyists, special interests, and business deserve "handouts" ? - the politician gets a payoff from a lobbyist, the lobbyist gets a payoff from its client, and the citizen gets higher taxes and/or prices that pay for it all.)

• "Hidden taxes" in higher prices are fine because they're not "taxes," per se? (Hey, forget that families are really paying business's costs for complying with a business income tax code - staff, consultants, submittals, etc.)

• It's far better to have a gargantuan tax collection "service" in Washington, than to have 50 decentralized, smaller, leaner state collection agencies collecting taxes from fewer sources?

• That the work by notable economists (paid tens of millions of $'s by Americans for Fair Taxation) doesn't carry weight because it was paid for by private funds instead of some gov't / quasi-gov't enterprise?

• That FairTax's backing by many economists doesn't carry any weight because (the Brookings') Wm Gale's testimony before the President's Commission on Tax Reform is - somehow - above all that?!

(NOTE: The Commission/Gale made up their own "consumption tax" requirements, as if that constituted a legitimate rebuke of the FairTax plan. Dr. Kotlikoff has requested - but never received - Gale's technical "modus operandi" which would definitively explain just how Gale's conclusions can be reconciled with Kotlikoff's well-documented technical work.

Let us work, together, to end the enslavement of the Tax Code and to restore Liberty to America's working families.

America's working families are paid because the companies they work for sell goods and services. Let's pay for government the way America's families are paid - when something is sold.