Monday, December 10, 2007

"Something d-o-o economics...."

This is yet another post in my continued analysis of the various contenders for the US Presidency. Today's victim: Mike Huckabee. There are a lot of things about him that I like. Things going for him are his take on faith and politics, education, globalization, and bits of his take on health care. I really liked his take on energy independence - being the first candidate I've seen to publicly state that our oil dependence is hurting us in the 'War on Terror'. Strikes against him include a ludicrously unworkable immigration plan and, among other things, generalized crazy.

His crazy is primarily centered in his Fair Tax agenda. Fair tax is for conservatives what socialized medicine is for liberals: a magical solution that works only in the land where unicorns prance around a benign Ronald Reagan and an unimpeached Bill Clinton.

(Style note: I use the term 'Fair tax' instead of the trademarked term 'FairTax'. I think the term 'FairTax' is a little fruity.)

Huckabee's Fair Tax - which is not his own idea - seems pretty straightforward. It has two major components:

1. A 23% sales tax on all new consumer goods and services. Notice that used goods would be exempted. This takes the place of all payroll taxes plus corporate income and capital gain taxes.

2. A monthly rebate check is issued to all taxpayers for the amount of tax paid up to the poverty line. As I understand it, the government would calculate the amount of money spent on taxes by a family living at the poverty line (which includes families making less than $22,000 year) per month and then issue a check to every family for that amount. (I haven't encountered anything that explains how that would play out for individuals.)

Huckabee argues that this plan will provide a number of benefits including: 1. reducing our lifetime tax burden, 2. making American products more competitive internationally, and 3. correcting the injustice of taxing the wealthy.

If I weren't a pinko Clintonista, I might buy this crap. Since I don't, here goes:

I have a few complaints with the idea of a fair tax generally. First, income tax deductions are a vital tool in encouraging good behavior. People do a lot of stuff because of the tax advantages involved such as: buying hybrid cars, buying houses rather than renting (which helps the overall economy dramatically), getting married, having children, etc. The sales tax will eliminate all of those incentives. In fact, it will actually decrease many of those incentives, most notably, having children.

Second, it will not simplify the tax code nor remove the need for bureaucracy. Someone will have to determine who gets the "prebates", enforce the honest reporting of taxes, and knock down the doors of non-payers.

A 'fair' tax will not reduce our lifetime tax burden. This plan simply exchanges one form of taxation for another. Even when coupled with the Huckster's plan to "not exactly" "shut down the federal government", people will still have to pay for the services currently funded through the government. Under his plan, all payroll taxes - Soc. Security, Medicare, Income tax, etc. will be eliminated. This means that consumers will need to pay for these services without the benefit of government assistance. Furthermore, under his plan consumers will have to pay for these things at a 23% sales tax premium. When you go to the hospital, you'll have to pay 23% for medical services that would have been provided tax-free under the current Medicare plan. The same goes for retirement planning, higher education and other government services that are funded by the income tax. We'll end up paying the same amount (or more) for those services but without the benefits of itemized deductions.

It will also fail to make our products more competitive internationally. The only way to make this happen is to lower labor standards here in the US, something which is entirely unrelated to taxes. Frankly, I don't want to live in Huckawannabee's sweatshop America.

Finally, he errs by making the argument that under our current system, we punish the rich for getting rich by making them pay higher taxes. It is true that in our progressive tax system, the more you make, the more you pay. That seems fair to me. The richer you are the more you benefit from the system that allowed you to get rich and stay that way. I don't care if you're paying 50% of your income in taxes if you still have millions of dollars left over - it's a simple matter of marginal value, something Huckabee and his friends from the hive don't understand. (Get it, "bee...hive"? I kill me!)

As Chuck Norris' favorite candidate gains support, it is important that voters remember that he is either pandering or downright stupid. Either way, that's not what I want from my president. Even though Chuck Norris can run so fast that he can run around the world and punch himself in the back of the head, I'm still not voting for his candidate.


Jared said...

Ooh ooh do Ron Paul next! I hate that guy.

Daniel said...

What, the darling of the crazy right? Never. Oh wait, I hate him too.

Kirsten said...

I think it's important to note that a sales tax is going to decrease consumption all around the board. A decrease in consumption hurts a lot of things, including government revenue (which is the matter at hand.) Some say that the Fair tax wouldn't end up doing that, but I'm pretty sure it would.

The rich will still be taxed more: they do tend to purchase expensive meals, houses, and purses. The Fair tax would possibly decrease tourism in the US.

Also, the arguement I often hear, that it would simplify the tax code, would pretty much not be true. We would have to create all sorts of rules for tax exempt companies, feeder organizations, farmers, the poor - related to the prebates, international transactions, and possibly so many more. Let's not forget about the Political Donor Class (the wealthy and business owners) who will certainly have their way with Congress and push for various tax breaks.

Federal sales tax is also likely to increase black market activity. You couldn't get rid of the IRS because they'd be needed to ensure everything people buy has been properly taxed. You would need to keep all your sales receipts, which would be a hassle.

In conclusion, let's keep the tax system as complicated as possible, so I get more money. I have more insight, as I have taken both a tax and macroeconomic class this semester, so perhaps we shall discuss later.

Rob said...

I am in no way saying I agree with the proposed "fair tax" plan, but I am saying that I must disagree with your views on it being ok to place more taxes on people with more money.

The system is backwards. We should reward those trying to better themselves and others by making more money not reward the scum who sit at home and do nothing. Case in point, I have a coworker who had a premature baby who has had nothing but problems since his birth. He now has close to 2 million dollars in medical bills. When he started working for us, he began making too much money to qualify for government assistance for his medical bills. So now, he has to declare bankruptcy, he has no other option, because he won’t be able to pay off those bills in his lifetime. He would have been better off sitting at home doing nothing. Is this the kind of system we want?

You might ask how making more money for myself would also benefit others. Well Bill Gates has the biggest charities on the planet. Plus, rich people have always given me a job, and maybe if they had more money, they could afford to pay me more. And the rich people who don’t care about higher taxes are usually the ones who didn’t really have to work all that hard to get that way (aka celebrities).

So while this fair tax plan may not be the way to go, I wouldn’t mind only paying 23% in taxes, because if I work out all that I pay in taxes now, it’s closer to 40-45%. Almost half of all I make goes to the government, so it makes me sick to think that there are people who don’t pay a dime and are still living in this land, using the roads, enjoying the freedom that I help pay for, but unwilling to better themselves because the government right now rewards their slothfulness and would punish them by taking away their free money if they did. I mean we all get an equal vote, so shouldn’t we all pay an equal share? It doesn’t make sense to me that some people pay more, yet their opinions on how it’s spent are no more important than those who pay nothing. I think if we expect everyone’s vote to have the same weight in the system, we should expect everyone to put the same amount into the system.

I’m all for a flat percentage for all. Especially since the rich always find ways around paying anyway. They didn’t get rich by being stupid, so it’s us middle class that take the brunt of it, because we can’t always afford expensive accountants to find us backdoors.

Kirsten said...

I'd like to note that if the rich had more money they wouldn't be giving anyone a raise but their yacht butler.

Rob said...

Then become a yacht butler. ;)