Huckabee's tax reforms doomed
Mike Huckabee wants to put my pal Harry out of business. Harry does my taxes. Huckabee wants to make tax preparers obsolete by getting rid of the federal income tax. He'll dump the IRS, too, if he can.
On that issue, the Arkansas governor belongs to a mighty large club. Few Republican presidential candidates ever went broke calling for tax cuts. Some, like Governor Huck, just take it to a farther extreme.
Now that he's surging in the polls, people are beginning to take seriously what he has to say. It turns out, despite all of the attention that the former Baptist minister's religious beliefs, social conscience and friendly, teddy-bear personality have received, his war on the income tax is a major reason for his surge.
Essentially, he's proposing to replace virtually all federal taxes with a consumption tax. Instead of taxing what you earn, the government would tax what you spend.
No income tax? Hey, sounds good to me. Tax time is so complicated in this country that about 60 percent of filers rely on professionals like Harry to do their returns, according to President Bush's 2005 tax reform advisory panel. But Harry's not worried.
"The candidates always talk a good game," he says. "And we're busier than ever in this office."
Harry's been doing other people's taxes for more than 30 years. He's survived privatizers, downsizers, Ronald Reagan and TurboTax. He's not worried about the guy from the Razorback State whose name sounds like a family restaurant chain.
Yet, Huckabee's plan excites a lot of people, especially those too young to remember countless other tax-reform dreams that failed to get anywhere.
His plan comes from a group called Americans for Fair Taxation. Their "FairTax" proposal, which is included in legislation before Congress, would replace the income tax, the corporate tax, the Social Security tax and virtually every other federal tax with one big national sales tax of about 23 percent.
"It's the best proposal that we ought to have because it's flatter, it's fairer, it's finite, it's family-friendly," Huckabee said in a recent Iowa debate. "And instead, we've had a Congress that spent money like John Edwards at a beauty shop."
But there's a problem. The FairTax faces the same big obstacle that President Bush's failed Social Security reforms faced. The more people look at it, the less they are likely to like it.
First, a sales tax is regressive. It puts a bigger burden on poor folks. The FairTax would offset that burden by paying a monthly tax "prebate" equal to 23 percent of the poverty line to everybody. Theoretically, that would compensate lower-income folks for the extra sales taxes they would pay. But, since upper-income earners feel the least pain of a sales tax, the prebate would only shift the tax's heaviest load from the poor to the middle class.
And the 23 percent figure is itself a matter of hot dispute. In effect, what costs $1.00 now would, under the new tax, cost $1.30. How is that not a 30 percent tax? Proponents argue that the extra 30 cents merely is 23 percent of the final price of $1.30.
Before your eyes begin to glaze over, let me explain in plain English: Adding 30 cents to each dollar still sounds to me like a 30 percent tax. The more voters hear that, the more bloom falls off the FairTax.
That's too bad because I, too, am dissatisfied with our complicated and constantly changing tax code. I also don't expect it to change by much very soon.
Our last best chance came from Bush's tax reform panel two years ago. It came up with two alternative plans. Each offered lower rates, fewer tax breaks and a lot fewer pages of tax filing forms. But both quickly wound up in some filing cabinet.
Bush had just suffered through the defeat of his Social Security reform plan and had little appetite for another fight over entitlements and tax burdens. Even modest changes to popular breaks like the mortgage interest tax deduction can spark bloody battles.
As widely despised as our currently cumbersome federal income tax may be, it also is familiar. It is politically easier to defend what the public already knows than to argue for the theoretical benefits in a system that has not been tried. People are familiar with the horse on which they rode in, even if it's a tired, costly old nag.
That's why my friend Harry isn't worried about having to change his line of work very soon. His future looks pretty secure. In fact, if Harry Jr. decides to follow his old man's career path, I'd say his future looks pretty secure, too.
