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Economic News, Data and Analysis

Huckabee’s Fair Tax Gambit

Since Huckabee’s rise in the polls, I’m getting more and more press calls about the so-called “Fair Tax.” The bottom line is that the FairTax — a flat sales tax that would replace all other federal taxes including income, corportate, estate, etc — really has no chance of going anywhere; so most of us economists don’t spend too much time thinking about it.
The president’s tax reform panel from a couple years ago devoted a chapter to a national retail sales tax and does a good job as anyone of taking it seriously and then dismissing it (see chapter 9 of the final report).
Their analysis shows the obvious — a flat rate sales tax would indeed mean a substantial tax increase on the middle-class and a massive cut at the top. (See figure below).
Getting back to Huckabee – I’m not sure how he is getting away with adopting the fair tax as part of his platform. Wouldn’t democrats be skewered in the media if they proposed a tax increase on people making between $30,000 and $200,000?
trp_fairtax.jpg
An aside, this came from the NYTimes article on Huckabee, and Fair Tax…
“Some reputable economists think the scheme is practicable.” Note they don’t say desirable or politically viable… Not exactly a vote of confidence…

Mike Huckabee – Presidential Election of 2008 – Elections – Evangelical Movement – Religion – Politics – Republican Party – New York Times

Huckabee’s answer to his opponents on the fiscal right has been his Fair Tax proposal. The idea calls for abolishing the I.R.S. and all current federal taxes, including Social Security, Medicare and corporate and personal income taxes, and replacing them with an across-the-board 23 percent consumption tax.
Governor Huckabee promises that this plan would be ”like waving a magic wand, releasing us from pain and unfairness.” Some reputable economists think the scheme is practicable. Many others regard it as fanciful. (For starters, it would require repealing the 16th Amendment to the Constitution.) In any case, the Fair Tax proposal is based on extremely complex projections.
Huckabee does not have an impressive grasp of its details. When I suggested, for example, that consumers might evade the tax simply by acquiring goods and services for cash on the black market, he seemed genuinely surprised.

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