Monday, August 27, 2007

What is the Objective of Our Tax?

The Republican caucuses are in bloom and a Huckabee is bearing his heart for the fair tax. Mike Huckabee, former Arkansas Governor, is launching his campaign for the Republican presidential nomination based on the fair tax. From his website he writes,

"The FairTax will replace the Internal Revenue Code with a consumption tax, like the taxes on retail sales forty-five states and the District of Columbia have now. All of us will get a monthly rebate that will reimburse us for taxes on purchases up to the poverty line, so that we're not taxed on necessities. That means people below the poverty line won't be taxed at all. We'll be taxed on what we decide to buy, not what we happen to earn. We won't be taxed on what we choose to save or the interest those savings earn. The tax will apply only to new goods, so we can reduce our taxes further by buying a used car or computer . . . "

The fair tax or consumption tax has a lot of benefits in that it lowers administrative costs and allows the market to operate more efficiently (lowers deadweight loss). Also, it lowers the cost of the consumer doing their own taxes. Those are the direct benefits, down the line there are many other advantages for the United States in areas of savings and trade.

One issue with the fair tax is that it would put an awful lot of people in the area of accounting out of a job, but that is only a short run view. Folks with marketable skills will still be able to find a job in industries that become larger because of the money saved.

Hearing so many Christians concerned about capitalism and how it hurts the poor and has caused the separation of the rich and poor really led me to write this post because the heart of the matter struck me about the fair tax and conspicuous consumption. It seems like some people think that capitalism is evil. But, I liken it to money. Money like capitalism is not evil in and of itself; the love of money or conspicuous consumption is a moral issue. We have to ask ourselves:

Is it the fact that they are rich that bothers us? – Or – Is it the way they spend their riches?

1 comment:

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:

• 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
• 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

• 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

• 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.