Huckabee puts national sales tax on campaign trail
By Dan Gearino, Journal Des Moines Bureau | Posted: Saturday, December 22, 2007
DES MOINES n Four months ago at the Ames straw poll, a man walked down the line of reporters' desks like a door-to-door salesman.
DES MOINES n Four months ago at the Ames straw poll, a man walked down the line of reporters' desks like a door-to-door salesman.
Ken Hoagland, a spokesman and strategist for Americans for Fair Taxation, didn't find many takers for his stacks of literature about a national sales tax n a plan his group calls the "FairTax."
"It was pretty much, 'Don't let the door bump you on the way out,'" he said, speaking from his office in Houston, Texas.
Hoagland didn't know he was a few hours away from his group's defining moment in the presidential campaign. That night, former Arkansas Gov. Mike Huckabee came in a surprising second place in the straw poll. His strong showing, with 2,587 votes, was at least partly because of support from the 400 voters bused in by Hoagland's group.
From there, Huckabee rose to the top of the Republican field in Iowa and across the country. His connection with Americans for Fair Taxation has helped insulate him from critics of his tax record in Arkansas.
But the tax plan, a radical rewrite of current law, has gotten little scrutiny.
In addition to Huckabee, two candidates have said they would sign the tax into law: U.S. Reps. Ron Paul of Texas and Duncan Hunter of California. Former U.S. Sen. Fred Thompson of Tennessee has said he supports a consumption tax in principle, though he has shied away from endorsing a specific plan.
So what is the FairTax, and how might it change the way Americans pay for their government?
The following are the basics:
* The current federal tax system would be thrown out in favor of a 23 percent consumption tax, or sales tax, on new goods or services. The only exceptions to the tax are for sales of previously-sold items, such as used cars, or on business-to-business transactions. All other taxes on corporations and individuals would vanish.
* Households would get an automatic monthly check from the government, called a "prebate." While the money is intended to reduce the tax burden for low-income families, all households would get a check. The important variable is family size, with every family of the same size getting the same amount, regardless of income.
* Internal Revenue Service would be shut down, with its functions replaced by a much smaller workforce in other agencies.
For taxpayers, the question is simple: Would I pay more?
FactCheck.org, a nonpartisan research group at the Annenberg Public Policy Center in the University of Pennsylvania, looked at how the FairTax would change the distribution of the tax burden among income levels. The analysis shows a decrease in the share of the overall tax burden for people with incomes from $0 to $24,156, an increase for people earning $24,156 to $75,223, and then a decrease for those at $75,223 and up.
The largest change for any income level is for people earning $42,436 to $75,223, whose share of the tax burden would rise 3.5 percent.
Supporters of the FairTax disagree with the FactCheck.org study. They say it paints the tax in an unfavorable light by focusing the distribution of taxation, rather than the economic growth that would occur in a more efficient tax system.
'We're not there yet'
Iowa State University economist Peter Orazem said the FairTax runs out of gas when it comes to actual implementation. He thinks the transition to the new system would be a disaster, marked by plummeting retail sales, stagnant wages and uncertainty about the solvency of the federal government.
"It's going to take the economy a while to adjust to that. Obviously, nobody's going to get a raise for a long time," he said.
The underlying problem, Orazem said, is that the economy doesn't respond well to sudden changes.
An economist who helped draft the FairTax plan, Laurence Kotlikoff of Boston University, disagrees with the idea that the transition would be rough.
"The economy should really surge because of this," Kotlikoff said.
He thinks the sudden end of corporate taxes would give the economy a burst of energy. Also, he thinks the increase in take-home pay will counteract the increase in retail prices.
However, he concedes that such a major change to the tax system is bound to have unforeseen ramifications that may be good or bad. For instance, he said there will be thorny questions about how to tax 401K accounts that would otherwise be subject to income taxes.
But Orazem thinks all the what-ifs are less important than the underlying political reality: The FairTax has almost no chance of becoming law.
Supporters of the tax need to do more than get a bill through Congress. They need to get three quarters of the states to approve the repeal the 16th Amendment of the Constitution, the amendment that deals with the income tax.
Because of this high threshold, Orazem sees the FairTax as an interesting discussion point rather than a viable proposal.
Hoagland said there may not be enough support for the tax today, but support is growing.
"What is required to make it come true and repeal the 16th amendment is the kind of voice from the citizenry that simply can't be ignored by elected officials. We're not there yet," he said.
Dan Gearino can be reached at 515-243-0138 and dan.gearino@lee.net.
FairTax basics
The advocacy group behind the FairTax has answers to some frequently asked questions:
* What is it? The FairTax is a 23 percent tax on goods and services charged only once, at the final point of purchase. Used items and business-to-business transactions are exempt.
* What taxes does it replace? It replaces all federal taxes, including taxes on personal income, estates, gifts and capital gains, along with the alternative minimum tax and corporate taxes. The tax also replaces payroll deductions for Social Security and Medicare. With the elimination of those taxes, all tax deductions would also be eliminated.
* What is the prebate? The so-called prebate is a monthly check from the government intended to reimburse the costs of the tax for families with incomes up to the federal poverty level. While the money is aimed at low-income families, all households would get a check, with the amount based on family size. For instance, a family with two adults and two children would get $525 per month, while a family with two adults and three children would get $591 per month. The checks would be automatic, with no need to fill out forms or calculate expenses.
Source: Americans for Fair Taxation
DES MOINES n Four months ago at the Ames straw poll, a man walked down the line of reporters' desks like a door-to-door salesman.
Ken Hoagland, a spokesman and strategist for Americans for Fair Taxation, didn't find many takers for his stacks of literature about a national sales tax n a plan his group calls the "FairTax."
"It was pretty much, 'Don't let the door bump you on the way out,'" he said, speaking from his office in Houston, Texas.
Hoagland didn't know he was a few hours away from his group's defining moment in the presidential campaign. That night, former Arkansas Gov. Mike Huckabee came in a surprising second place in the straw poll. His strong showing, with 2,587 votes, was at least partly because of support from the 400 voters bused in by Hoagland's group.
From there, Huckabee rose to the top of the Republican field in Iowa and across the country. His connection with Americans for Fair Taxation has helped insulate him from critics of his tax record in Arkansas.
But the tax plan, a radical rewrite of current law, has gotten little scrutiny.
In addition to Huckabee, two candidates have said they would sign the tax into law: U.S. Reps. Ron Paul of Texas and Duncan Hunter of California. Former U.S. Sen. Fred Thompson of Tennessee has said he supports a consumption tax in principle, though he has shied away from endorsing a specific plan.
So what is the FairTax, and how might it change the way Americans pay for their government?
The following are the basics:
* The current federal tax system would be thrown out in favor of a 23 percent consumption tax, or sales tax, on new goods or services. The only exceptions to the tax are for sales of previously-sold items, such as used cars, or on business-to-business transactions. All other taxes on corporations and individuals would vanish.
* Households would get an automatic monthly check from the government, called a "prebate." While the money is intended to reduce the tax burden for low-income families, all households would get a check. The important variable is family size, with every family of the same size getting the same amount, regardless of income.
* Internal Revenue Service would be shut down, with its functions replaced by a much smaller workforce in other agencies.
For taxpayers, the question is simple: Would I pay more?
FactCheck.org, a nonpartisan research group at the Annenberg Public Policy Center in the University of Pennsylvania, looked at how the FairTax would change the distribution of the tax burden among income levels. The analysis shows a decrease in the share of the overall tax burden for people with incomes from $0 to $24,156, an increase for people earning $24,156 to $75,223, and then a decrease for those at $75,223 and up.
The largest change for any income level is for people earning $42,436 to $75,223, whose share of the tax burden would rise 3.5 percent.
Supporters of the FairTax disagree with the FactCheck.org study. They say it paints the tax in an unfavorable light by focusing the distribution of taxation, rather than the economic growth that would occur in a more efficient tax system.
'We're not there yet'
Iowa State University economist Peter Orazem said the FairTax runs out of gas when it comes to actual implementation. He thinks the transition to the new system would be a disaster, marked by plummeting retail sales, stagnant wages and uncertainty about the solvency of the federal government.
"It's going to take the economy a while to adjust to that. Obviously, nobody's going to get a raise for a long time," he said.
The underlying problem, Orazem said, is that the economy doesn't respond well to sudden changes.
An economist who helped draft the FairTax plan, Laurence Kotlikoff of Boston University, disagrees with the idea that the transition would be rough.
"The economy should really surge because of this," Kotlikoff said.
He thinks the sudden end of corporate taxes would give the economy a burst of energy. Also, he thinks the increase in take-home pay will counteract the increase in retail prices.
However, he concedes that such a major change to the tax system is bound to have unforeseen ramifications that may be good or bad. For instance, he said there will be thorny questions about how to tax 401K accounts that would otherwise be subject to income taxes.
But Orazem thinks all the what-ifs are less important than the underlying political reality: The FairTax has almost no chance of becoming law.
Supporters of the tax need to do more than get a bill through Congress. They need to get three quarters of the states to approve the repeal the 16th Amendment of the Constitution, the amendment that deals with the income tax.
Because of this high threshold, Orazem sees the FairTax as an interesting discussion point rather than a viable proposal.
Hoagland said there may not be enough support for the tax today, but support is growing.
"What is required to make it come true and repeal the 16th amendment is the kind of voice from the citizenry that simply can't be ignored by elected officials. We're not there yet," he said.
Dan Gearino can be reached at 515-243-0138 and dan.gearino@lee.net.
FairTax basics
The advocacy group behind the FairTax has answers to some frequently asked questions:
* What is it? The FairTax is a 23 percent tax on goods and services charged only once, at the final point of purchase. Used items and business-to-business transactions are exempt.
* What taxes does it replace? It replaces all federal taxes, including taxes on personal income, estates, gifts and capital gains, along with the alternative minimum tax and corporate taxes. The tax also replaces payroll deductions for Social Security and Medicare. With the elimination of those taxes, all tax deductions would also be eliminated.
* What is the prebate? The so-called prebate is a monthly check from the government intended to reimburse the costs of the tax for families with incomes up to the federal poverty level. While the money is aimed at low-income families, all households would get a check, with the amount based on family size. For instance, a family with two adults and two children would get $525 per month, while a family with two adults and three children would get $591 per month. The checks would be automatic, with no need to fill out forms or calculate expenses.
Source: Americans for Fair Taxation
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FAIRTAXBILL wrote on Dec 24, 2007 4:30 PM:
FairTaxHonesty wrote on Dec 23, 2007 6:43 PM:
FairTaxFraud wrote on Dec 23, 2007 8:41 AM:
James A. Hodges wrote on Dec 23, 2007 7:11 AM:
Hector wrote on Dec 23, 2007 2:21 AM: