January 03, 2008
Hitting Huckabee's Tax Plan From The Right & Left
Mike Huckabee seems poised to best Mitt Romney in the Iowa caucuses tonight despite having a fraction of the Massachusetts millionaire's organization or campaign cash. A solid win will make Huckabee the talk of the nation tomorrow. But don't expect the rush to last.
The reason being that Huckabee's economic record is deeply troubling to very important segments of the GOP base. Huckabee anticipates hitting a wall on his record of tax increases as Arkansas governor, which is why he has come out forcefully -- albeit to the disbelief of some -- in favor of abolishing the IRS.
"I'm not being facetious," Huck protested after stating this position in a November debate. Maybe not, but tacking to an extreme in order to disprove the appearance of softness is politically risky -- mainly because extremes themselves are risky, often unpopular and quite frequently unrealistic.
Instead of a tax on incomes, Huckabee is calling for a 23-percent national tax on consumer goods and services. Sounds great, right? Lesser-income people who buy small-ticket items anyway would hang onto their paychecks and not pay very much above the price tag, while those with loads of cash to burn will have to put extra into the federal pot when they buy big-ticket luxury goods.
But many economists who have studied the "fair tax" say that while low-income people may benefit, middle-income Americans will be hit hard. That's because without an income tax, there are no tax credits, which for many middle-earners are a lifesaver. Moreover, there is no assurance that everyone buys into this system, because black markets would inevitably pop up. Americans might also bypass the tax through international purchases. Ensuring that all consumption is done aboveboard in the age of the Internet would probably require greatly beefed-up online regulation. Good luck selling that to small-government/privacy advocates.
In a December editorial, University of Central Oklahoma economist Mickey Hepner wrote, "There no longer would be a child tax credit, child care tax credit -- in fact families would have to pay a 30% tax for the child care services they purchase -- or the additional exemptions for children worth a $3,500/per child deduction in 2008."
Good luck selling that to -- well, just about everyone.
We get why Huckabee has to stamp his foot so loudly on the issue of taxes, but he risks alienating both the right and left with his fair-tax plan. (Big hat tip to Matt Cooper.)
Mother Jones' Niko Karvounis observed last month that fair-taxers make a somewhat deceptive pitch, by trying to sell the fair tax as a simple sales tax. They're not the same.
Supporters of the fair tax say that this amounts to a tax rate of 23 percent; but it's really more like 30 percent. As is currently understood, a $100 good with a 30 percent sales tax is promoted on the shelf as $100 and is sold at the register for $130. Under the fair tax, the list price and the register price would be the same -- $130. The retailer would give 23 percent of that $130 to the government. But the math works out the same: The retailer keeps $100 and the government collects 30. The consumer, therefore, has actually paid a 30 percent premium despite the fact that the fair tax itself is nominally -- and misleadingly -- listed at 23 percent.
And National Review's Jim Geraghty also opposes Huck's fair tax, suggesting it's more a fairy tale than an actual economic plan.
"I'd prefer a candidate who had a plan B for tax reform that could be passed with, say, simple majorities in the House and Senate," Geraghty wrote on Dec. 20.
It wouldn't just be advocates for the middle class who'd oppose a fair tax, Geraghty observes. All of K Street would be up in arms about it, as would most corporate and special-interest entities that currently receive tax breaks. Plus: "Every charity of every stripe, ready to push orphans and puppies in front of the camera, claiming they're doomed without the charitable deduction."
Is it too late for Huck to bring his economic plan a little closer to earth? Maybe not. But will he have to remain somewhat hard-core on the taxes issue? That depends. Clearly his populist message is resonating among certain Republican voters in this time of deep economic pessimism. And as we learned following the 2006 midterms, certain conditions can sap sway from anti-tax advocates like the Club for Growth.
The Christian Science Monitor is up with a look at the candidates' various tax plans. You may have noticed that we're not going to wall-to-wall on the caucuses. Here's our explanation for why. For those of you who can't get enough election-related minutiae, keep an eye on our Campaign Tracker 2008 page tonight. We'll be analyzing the results tomorrow.
Posted at 5:50 PM
Posted to:
Campaigns, Mike Huckabee, Republicans, Taxes, WH 2008
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