The Fair Tax Disaster and Mike Huckabee

When General Motors purchased EDS from Ross Perot, Mr. Perot became the largest individual G.M. stockholder.   From experience as an entrepreneur responsible not to some anonymous conglomeration, but to himself and his people, Perot developed very simple and direct attitudes to solve problems.

When you see a snake, kill it!

It was quite a cultural shock for Perot to find the General Motors procedure to deal with snakes comprised assembling managers (who never even saw the snake) for a sit down meeting where various ideas about dealing with the snake would be bantered about until a consensus was reached where all in session would agree to table the problem and take it up at a future meeting.

Needles to say, the Ross Perot General Motors partnership was no match made in heaven and ended in General Motors paying Ross Perot double the market value for his stock to leave the company, even though the merger was encouraged specifically because Perot could offer a freshness and independence sorely needed by the stodgy old giant.  

It is a relevant fact of life that entrepreneurs succeed or fail by sharply applying their wit and experience while bureaucracies function and forge ahead purely due to momentum and inertia.   It is almost impossible to kill a big corporation, although many corporate boards try to do just that all the time.   The problem is people working within bureaucracies are almost never rewarded for solving problems, but for maintaining the status quo, and promoting more dependence on the bureaucracy.

As bad as this phenomenon can become within large corporations, ultimately, the free-market will reign in these rogue practices when they are applied within the private sector.   Competition cannot be overruled by corporate bureaucratic authority.

Unfortunately, this cannot be said of government bureaucracies, and the only thing more amazing than incompetent application of bureaucratic authority within government agencies is the ease with which bureaucrats will embrace the most imaginative hare-brained schemes and boondoggles.   The capacity bureaucrats have to embrace stupidity can even surprise America’s most hardened cynics.

One  retarded California initiative that has been discussed by some of our legislators recently was to fit each and every automobile within the state with a device that would track its mileage by satellite and beam this information to some central authority where it could be disseminated and processed.   Subsequently taxes would be assessed to California citizens based upon the amount of driving which was recorded by these devices.   The costs which would be introduced into such a system are mind-boggling; it was billions just for the mileage units, to say nothing about the bureaucracy which would manage this scheme, all because collecting tax at the pump is somehow not properly representative…unbelievable!

Most Americans know the dumbest politicians of all reside in California (although New York gives us a run for our money).   Our Senators are only outdone by the supremely disappointing Arnold Schwarzenegger (he calls himself a Republican and I voted for him, sheeesh!).  

It’s bad enough when stupid politicians are relegated to leaders of state government, but when they get into the presidential race we all need to worry.

Governor Huckabee’s rocket launch into the top tier of Republican candidates makes me wonder if anybody is paying attention.   His record as a big government taxer is pretty clear; as governor of Arkansas he increased taxes and increased Arkansas’ debt by over a billion dollars.   The state’s economy under Huckabee was no better when he left after ten years than when he began, and The Club for Growth reviews his performance as a mixed bag at best.

Clearly he is not a conservative, but his support of the Fair Tax is the thing that really sets up red flags.   The old adage, If you can’t dazzle them with brilliance, baffle them with bullshit , has never erred in appraisal of salesmen or politicians, and Mike Huckabee is full of it.

The Fair Tax is essentially an increase in the sales tax accompanied by eliminating all income taxes to finance government operations, suggesting somehow that this form of tax collection will fairly redistribute the tax burden.   When politicians say fair it means get the rich guy , and rich guy is anyone who makes a little more than minimum wage.

Huckabee’s suggestion that the fair tax is a preferable system is typical of bureaucratic thinking and it is the kind of thinking you would never see from a fiscally responsible businessman.

How much is it going to cost to completely alter the manner in which we collect taxes?

How are those costs going to manifest themselves in the minutia of bureaucratic incompetence?

Why is this form of taxation Fair while our current system is not?  

What makes us think Rich Guys are not going to change their behavior when faced with a 30%  23% sales tax on that new yacht, and choose to make such purchases out of the country or refrain from such purchases all together?   Perhaps yacht guy needs a new 2,000 square foot addition to his house, and building contractor guy does it for free in exchange for that million dollar yacht for a hundred grand.   Even if this scenario isn’t feasible, you get the idea.

Human aversion to taxation is like water, it will always find a preferable path when blocked, and no bureaucrat is any match for a man who has earned his own money.

The unanticipated consequences of such a broad and sweeping policy shift cannot be anticipated, and on top of that, it’s never going to happen.   Huckabee’s support of such a policy change is either naïve, indicating his lack of readiness for the job, or is a disingenuous political maneuver designed to capture dispirited voters, indicating his lack of readiness for the job.

There is nothing wrong with the way we collect income tax, it is just that the government takes way too much and deliberately penalizes success encouraging our most effective producers to waste loads of time and money in tax avoidance strategies instead of building their businesses providing goods, services, and jobs.

Steve Forbes wrote a great book, The Flat Tax Revolution, where he demonstrated how a fair and equitable tax system has spurred dozens of economies (previously imprisoned behind the iron curtain) which are now free after the Soviet Union’s disintegration.

Mike Huckabee ought to read it.

 

 

Copyright 2008 Jim Pontillo

20 thoughts on “The Fair Tax Disaster and Mike Huckabee

  1. You have obviously not read the Fair Tax book, or you would not be writing such things.

    The Fair Tax is a good thing. It is a 23% (not 30% as you state) inclusive tax on all sales at the consumer level. The idea of the fair tax is that all of the income taxes that the company that makes widgets has to pay go away. Everyone takes home their full paycheck. You make $50/hour, and work 40 hours, you take home $2000. Simple, you earn what you make, and the government does not take from your wallet at gunpoint.

    On top of removing income taxes from the equation, the Fair Tax will remove all of the other taxes that get paid by corporations have to pay on the federal level to operate. But really, they don’t pay those taxes right now: It’s rolled into the price of the item you buy right now.

    What should happen, should the Fair Tax get implemented, the prices on everything should stay the same, except you now get to bring home more money.

    The current US taxing system started with the idea of a flat tax. Then it went graduated. Then the deductions. Our current tax code is so complex that it’s nearly impossible for mortal men to decipher it, IMO. And that’s the problem I have with the Flat Tax system: It’s too easy for those who would rather buy power than earn it to manipulate the system for their friends/constituents.

    As for other things that Huckabee is, I can’t argue. The Fair Tax however is a GOOD THING. It’s a truly conservative idea that would end corporate welfare, and let Americans take home what they earned.

    Please. Read the book. At least the website, before you rip on something that you have no real firsthand information on.

  2. Jellisii,

    I apologize for the oversight. I will fix the 30% 23% error, and I should not have been so careless, however that was not the point of this article.

    Every time politicians debate the effects on revenue from tax changes they are wrong. After Democrats complained we can’t afford Bush’s “tax cuts” more revenue flowed into the treasury and a greater percentage of all revenue was paid by the “rich”.

    The problem with our progressive tax system is that it pits citizens against each other and it destroys the spirit of our free-enterprise system which brings the quality of life up for all people regardless of disparities in income.

    The flat tax is a proven system with many examples of its success in Eastern Europe, again, Steve Forbes book.

    Where is evidence that a national sales tax will succeed in its goals?

    How can you or anyone else anticipate the unintended consequences of such a drastic policy change?

    What kind of an impact is a 23% increase in goods going to have on our ability to compete with goods around the world?

    Why not earn lots of tax free money here in the United States and purchase goods out of the country flown in on your own private jet?

    The number of scenarios for tax avoidance is nearly impossible to anticipate or calculate.

    We know what we have with our current structure; our current method of tax collection is not the problem, government spending is.

    Are we all in this together or not?  If we are, a flat tax gives all citizens a stake and pride in our American system.

    E Pluribus Unum

  3. The most important point about the fair tax is that you don’t hear Huckabee talking about a constitutional amendment to implement it. That means the 16th amendment (authorizing income tax) still stands.

    With the income tax still legal, either Huckabee or the next president will keep on a 1% income tax for the ‘very rich’ for the children or something like that. As time goes on, 1% becomes 2%, very rich becomes middle class. Run that cycle a few times and we end up with a national sales tax and national income tax for everyone that currently is paying taxes. No thanks.

    Until we talk about amending the constitution, I will not even consider the national sales tax.

  4. A Fair Tax gets all the lowlife to finally pay their share – welfare scum, illegal aliens, retirees – and yes, even kids will chip in.

    In that sense it is fair, a tax on consumption and it is a boon for savings.

    However, for this to really work, the Income tax must be eliminated and made forever illegal.

    Otherwise, we end up like Socialist Europe – with a 40% income tax and a 22% VAT tax.

  5. The problem I have with “Fair Tax” is one that no one seems to be willing to address:

    I work a part time minimum wage job. I attend college full time so I can drop said crappy job. My husband works full time at an equally crappy job. We have three small children. Our family is below the poverty line. But we make it just fine. We don’t seek gov’t assistance. We work harder/longer/differently if we need to, but we make it on our own.

    Because of our financial situation, we pay nearly no income taxes. The little bit that we do pay isn’t enough to make or break us. Also, because of our situation, we buy nothing on credit. If we need a new vehicle, we work hard to pay out of pocket. We refuse to spend our limited funds on interest.

    So what will the fair tax do for us?

    The way I see it, it will screw us royally. We’ll get to keep the few dollars a week that we’re currently paying in taxes, but we’ll have to spend mountains more for necessary goods/services. I doubt the ‘preimbursment’ for the poverty line will accurately cover the tax on those purchases, especially if we are faced with a big ticket item (remembering that we don’t buy on credit, so it would all be paid up front).

    So, what would we do to survive?

    We’ll be forced to buy everything we possibly can second hand. Now, that’s not so bad on many things. We do that already. But what about things like car seats? I won’t buy a used one and put my child in danger. So if I buy a new car seat that retails for $60 (a cheapy, for sure) I’ll actually be paying $77 for that purchase (23% to the feds and 7% to state and local). That $17 pay not seem like much to you, but that’s my gas money for a week.

    to be continued…..

  6. …… part 2

    What about diapers? We use cloth diapers. Many people in the same financial boat do not/can not, so what does this do for them? When our third baby was born (before DH lost his high paying job to outsourcing) all three of my boys were in diapers at the same time. $120 worth of diapers for the month becomes $156. That extra $27.60 for the feds is only $3.40 away from enough to cover one of my boys taking a month’s worth of gymnastics. So those who otherwise could afford a tiny luxury for their child can no longer do that.

    All in all I believe this will have devastating consequences for those who pay very little in taxes under the current system.

  7. One thing that is attractive to me for getting rid of income tax is no longer having to pay a CPA to do my taxes. No more Quickbooks record keeping.

    But I also agree that we should not switch to anything like the fair tax until the constitution is changed to ban all forms of income tax otherwise we’d just be giving the feds yet another way to tax us.

    On a side note, does it ever irritate you to hear the Liberals say that the tax cuts always save the evil rich people more taxes than the poor? It seems that such Liberals need a lesson in simple mathematics. If person A pays $10 on $100 of income & person B pays $1,000 on $10,000 of income & the tax rate is cut in half from 10% to 5% of course person B is going to save more than person A. Person A will only “save” $5 while person B will “save” $500. The thing the Liberals forget is that person B is STILL PAYING $495 MORE THAN PERSON A! Stupid Liberals.

  8. Pingback: Mike Huckabee » The Fair Tax Disaster and Mike Huckabee

  9. First, in response to Santiago, who classified retirees among lowlife who don’t pay their fair share of taxes, I’d like to assure him that we retirees pay taxes at the same rate as other Americans. We also pay taxes on our Social Security income, which is effectively a tax on a tax.
    The Fair Tax, is an excellent idea if the 16th Amendment is repealed and never reenacted. Consider the enormous costs of the current system on both individuals and corporations just to maintain the necessary records and to prepare and file income tax returns. Abolishing the income tax should drive down costs of all consumables.
    Also consider the billions of dollars untaxed in illegal activities such as gambling, prostitution and drugs. A consumption tax captures a portion of that money, which no income tax could ever touch. Taxing these new sources of revenue should result in a reduction in the Fair Tax rate (though with government in charge of collection and spending, this is harder to envision!)
    One must also consider the gains in productivity. How many millions of man hours (and women hours) are wasted annually in assembling records and filing tax forms? From personal experience, I can attest that the OMB estimates of times required to prepare and file the various forms are ridiculous.
    Look at some other figures: the IRS projected budget for FY 2008 $11.1 billion, the IRS’s National Taxpayer Advocate estimates that taxpayers who comply with their tax obligations pay an annual $2,680.00 surtax to make up for those who don’t.
    Don’t forget that the Fair Tax plan would not only eliminate the Income tax, but all payroll taxes including Social Security and Medicare which represent the largest tax burden for those at or near the minimum wage level. Thus Amie, above, who worries about not having $17.00 for gas would have no worries if her family income were over $236.00/week because she wouldn’t be paying the 7.2% FICA tax. She might even get a raise, since her employer wouldn’t either!

  10. I guess Santiago doesn’t plan on retiring since he would then be consider a lowlife. Did you ever think, Santiago, that those who have retireed just spent about 50 years paying taxes?

    I plan on retiring as soon as I can.

  11. Just happened to link to your site – saw your “IQ under 100 links”.

    FYI – viewers of Olbermann’s Countdown have a 3 to 1 advantage in education and college graduates v. O’Reilly’s viewers. Want to bet which group has an average higher IQ? Let me know when you’re ready to put your money where your mouth is . . .

  12. Well Lance,

    I can’t tell you how many “college graduates” I have had to fire because they couldn’t do their job.

    And if Olbermann’s viewers have higher educational attainment than O’Reilly’s it just goes to show how our institutions of higher learning are indoctrinating instead of educating, and making our citizens dumber with each degree they “sell”.

  13. Ok, to the poor people that pay almost no taxes due to the current income tax system…. you are worried that you will be unfairly taxed in the FAIR tax system….read the literature, learn about what you are condemning before you condemn it. The plan for the fair tax is to have a credit “a prebate” each month to offset the poverty level for each person who can validate their social security card. this way there is a penalty for being an illegal alien beyond just paying a consumption tax so they can help pay for the social services that they are taking advantage of at an alarming rate.

  14. You will have to do a lot better than this article to stop the Fairtax. You clearly do not understand the Fairtax and you look like a closet elected Dumbocrat.

  15. Folks, you are missing some big flaws here.

    (1) and most important – If the Gov wants more moeny, they merely have to raise the index on the fair tax. In other words, it’s conceivable with the kind of politicians we have, that the “fair tax” could easily grow to be an additional 50% on every purchase.

    (2) The only way for normal law abiding citizens to avoid the “fair tax” it to NOT BUY products that aren’t essential. That’s a recipe to ruin an economy. Also, would the “fair tax” apply to houses? Your 200K house now sells for 250-280K due to the applied tax? There is a point in all products with this plan that the cost of it exceeds the equity or value of the product, so nobody buys….or can buy….or wants to. Again, a recipe to not only stall an economy, but to reverse it back to the days of bartering.

    Giving money to government – the kind of government we’ve had for the last 20 years – ensures wasteful spending. Doesn’t matter what the source is. Until you address the wasteful spending, and HALT it, you haven’t fixed anything.

    The richer a person is, the more likely he can find a way around the tax. As always. The poorer a person is, the less likely he can….and the more perceived damage a tax like this does to him.

    How much will it REALLY cost when EVERY person or place who sells ANYTHING at all has to become a tax collector for the federal government? And how much additional percentage will the State (as in CA for example) tack onto the “fair tax” percentage? How many innocent small business owners can/will be charged with tax evasion because they aren’t accountants, just small businessmen. Small problem, but not to the small businessman.

  16. “I can’t tell you how many “college graduates” I have had to fire because they couldn’t do their job.

    And if Olbermann’s viewers have higher educational attainment than O’Reilly’s it just goes to show how our institutions of higher learning are indoctrinating instead of educating, and making our citizens dumber with each degree they “sell”. ”

    A) Universities usually do not teach machine shop skills

    B) Has it ever crossed your mind that education requires people to be open minded, something that viewers of Bill O’Reilly and neoconservatives in general think is a loathsome COMMUNIST trait?

  17. Do you actually have any arguments, or just ad hominem attacks and empty rhetoric?

  18. Leftists are the new fascists, democrats are the new socialists and republicans are the new democrats.

    When the US goes down the toilet will it go clockwise or counter-clockwise?

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