Prepare Your Taxes: The Role of the FairTax in Huckabee's Win

Time Magazine's campaign blog had an interesting article today analyzing the role of the grassroots organization of the FairTax in Mike Huckabee's big victory on Thursday in Iowa. The article also provides a nice brief historical context for the FairTax, and is rather favorable of it. Here's a portion:

Mike Huckabee's victory in Iowa Thursday was a big victory also for the "Fair Tax," the radical revamping of the federal tax code that he endorses. And while Huckabee's Iowa win may be a one-off, one gets the feeling that the Fair Tax campaign will be with us for a while. The resurgent John McCain is mildly supportive of it as well. And the legions of Fair Tax fanatics aren't going anywhere.
The Fair Tax is a proposal to abolish the Internal Revenue Service, throw out all existing federal taxes and replace them with a 30% nationwide retail sales tax that would, it is hoped, raise about as much as income taxes, payroll taxes, excise taxes and the lot do now. You'll hear a lot of the Fair Taxers saying it's a 23% tax, which it is, if you think of it like an income tax. (No use getting bogged down in that here; I'll explain at the bottom of the post.)
Anyway, on the occasion of Huckabee triumph, I called up Leo Linbeck Jr., the Houston businessman who together with two friends launched the Fair Tax movement just over a decade ago. I'm not sure what I expected from the conversation--maybe a little gloating over the Iowa results, I guess. What I got was two hours of mostly fascinating discourse, ranging from tax theory to feudal nature of modern Washington D.C. to the ideas of philosopher/theologian Michael Novak.
The Fair Tax got started like this, Linbeck told me: Three old rich men in Houston talked over lunch in 1995 about what they could do to leave the country better off before they died. They hit on reforming the tax system, and in particular simplifying it, as a worthy goal. "I've been a beneficiary of the complexity of the tax code," is how Linbeck puts it.

While the Tax Foundation does not officially endorse the FairTax, it is nice to see tax reform on the agenda in the 2008 presidential election, regardless of who the candidates are and what tax reforms they are proposing.

For a less sympathetic view of the FairTax compared to this Time Magazine blog, here is a recent podcast we conducted with one of its biggest critics, Bruce Bartlett. Also, last year, we conducted a podcast with its leading academic supporter, Laurence Kotlikoff.l

Go to the original author's site::

It appears that the General Theory is on the president's reading list once again. Given that the economy appears to be headed for a slowdown this year, the Bush Administration is considering short-term tax relief as part of an "economic stimulus" package, according to an AP story today by Martin Crutsinger:

The Bush administration, faced with a deteriorating economy and a big jump in unemployment, said Friday it was considering an economic stimulus package that might include tax cuts to ward off a recession.
On Friday, the Labor Department reported that unemployment was at a two-year high of 5 percent in December, while employers clamped down on hiring for the month. The amount of new jobs employers added to their payrolls was at a four-year low.
Officials stressed that President Bush has not decided yet to offer a proposal but was looking at a variety of options with a plan possibly being unveiled around the time of his Jan. 28 State of the Union address.
"The president is always looking at options ... always talking to people and looking at data," Commerce Secretary Carlos Gutierrez said in an interview with The Associated Press.
...
White House spokesman Tony Fratto said tax cuts were an option being considered.
Bush in his first term included a tax refund of up to $300 per person to combat the impact of the 2001 recession. Private economists said another round of tax cuts would be the best approach to get money to people who would spend it.
Some suggested a one-year tax rebate of $500 might provide a sufficient shot-in-the-arm for the economy. But they stressed that the proposal would have to be passed quickly.

The extent to which short-run fiscal stimulus packages work in stabilization has been the subject of decades of research in macroeconomics leading researchers to draw differing conclusions. But we do know that rebate checks are not free. They cost revenue and are really no different than a spending program. And most economists on both the left and right would agree that rebate checks have little long-run Laffer Curve feedback effect. Finally, there is the administrative costs of sending out over 100 million checks.

Go to the original author's site::

As Mike Huckabee continues to ride momentum from his win in Iowa on Thursday, his tax plan is getting closer scrutiny from the media. Here's a rundown of some of the feature articles on his tax plan, the FairTax, that have run in newspapers over the past month or so.

News Articles:

Huckabee's Tax Plan Appeals, But Is It Fair? - New York Times

Fair Tax? Flat Tax? Candidates Tout Novel Plans - Christian Science Monitor

In Spotlight, 'FairTaxers' Push Cause - Boston Globe

Hitting Huckabee's Tax Plan from the Right & Left - National Journal online

Huckabee Tax Plan Raises Eyebrows - Reuters

Criticism Aside, 'FairTax' Boosts Huckabee Campaign - Washington Post

FairTax Part of Huckabee's Rise, But Idea Does Not Lack Critics - Investor's Business Daily

Huckabee Whips Up Debate with FairTax Plan - NPR

The Fairest Tax of Them All? Proposal Replaces Income Tax With Consumption Tax? - Globe Gazette

Huckabee Campaigning for 23% Sales Tax - Los Angeles Times

Putting the TaxMan Out of Business - Concord Monitor