Before I talk in significant depth about Mike Huckabee's "FairTax" – the latest branding of the conservative wet dream of a National Sales Tax "replacing" the IRS – let me give you a quick introduction to what kind of shady fuckers we are dealing with. Huckabee claims that the sales tax rate would be 23%, but it's 30 cents on the dollar. How is that 23%? Well, 30 cents is 23% of $1.30, which is the cost of a $1 purchase after the tax is added.
They are calculating the tax rate as a percentage of the cost with the tax included. Because 23% sounds a lot less intimidating than 30%, which is what 30 cents on a dollar is the last time I checked.
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I believe that his championing of the "FairTax" says more about who Huckabee is than anything else. And make no mistake, he is a pandering, lousy politician who happens to be right of William F. Buckley on essentially everything. The ask-no-questions, read-the-press-release-into-the-camera media bought heavily into his effort to sell himself as a moderate, but the reality is that he's a Baptist preacher with no foreign policy knowledge and economic ideas that consign most Republicans to the loony fringe.
The idea of "scrapping the IRS" has inherent appeal, and people like Huckabee know it. Never too proud to pander, they beat on the IRS straw man every time they start to slip. The idea of scrapping it in favor of something called the "FairTax" is almost too cynical to measure. Like a person who introduces a statement with "I'm not a racist…" is inevitably about to say something really racist, calling something "FairTax" is the finest possible indication that it is really, really unfair.
The national sales tax is the kind of issue that used to separate the contenders from the fringe in the GOP. You could expect to hear it once every four years from the likes of Phil Gramm, Jack Kemp, or some other Why Is This Guy Running case. That a leading contender like Huckabee is pitching it in 2008 shows you just how far our political discourse has shifted to the right. Why is it not a more mainstream idea? Getting rid of the IRS sounds awesome, right?
Sales tax revenues are both wildly unpredictable and severely regressive. The more money you make, the smaller percentage of it you pay in sales tax. And in any given year, the amount of tax revenue will depend on how much people decide to spend. So the challenge of mainstreaming such a bizarre idea is to make it "fair" to the poor and revenue-neutral compared to the current system.
In the contemporary example, the FairTax gives a "prebate" – a check for a couple of grand per year – to each household to offset the taxes they pay on the first $20,000 of income/spending. Not only does this require the government to front half a trillion in cash each year, but who exactly is going to take care of this? There's no IRS, after all. Well Huckabee proposes that the "United States Fair Tax Federal Revenue Administration and State Tax Authority Reconciliation Service" will handle the bureaucratic side of things. Does that sound like a small, efficient organization? Does keeping track of how much money is being mailed to whom every year sound like a simple job? No, what Mike Huckabee is disingenuously promising is to give the IRS a new name. That's helpful.
Second, the fine print on the FairTax notes that 30% (oops, I mean 23%) is the minimum rate that will be required. The Brookings Institute estimates that a revenue-neutral rate based on 8 years of Bush spending would be 44% whereas the Joint Congressional Committee on Taxation estimates 57%. The group's estimate of 30% (sorry, 23%) assumes massive reductions in federal spending – in the midst of a $200 million per day war. And these estimates are before the "exemptions" that would inevitably follow for things like home mortgages.
Let's play along for a second and pretend that it's revenue-neutral at something like 40%. So we enact the new plan. If it's revenue-neutral and doesn't require appreciably less bureaucracy than the current system, what the hell is the point of making the change? It's simple – people under $30k pay nothing in taxes, those between $30-$100k get a tax hike, and those making six figures get an enormous tax break. Families that spend most of their income (i.e. the poor and middle class) will part with more of their money than before, whereas earners who save/invest a lot will pay not a penny on that income.
Mike Huckabee has gotten a great big pass on this. Can you even imagine what would happen if a Democrat proposed a plan that would raise taxes on incomes between $30k and $100k to forty or fifty percent?