Huckabee and the Fair Tax

Washington Post:

To former Arkansas governor Mike Huckabee, supporting a national retail sales tax is more than a policy proposal. It has provided much-needed muscle for his campaign, filling rallies and events with fervent supporters hoping to replace the entire income and payroll tax system.

There's one problem: A national sales tax won't work, at least not according to tax experts and economists of all political stripes. Even President Bush's Advisory Panel on Federal Tax Reform dedicated a chapter of its 2005 final report to dismissing such proposals.

"After careful evaluation, the Panel decided to reject a complete replacement of the federal income tax system with a retail sales tax," the panel said. It concluded that such a move would shift the tax burden from the rich to the poor or create the largest entitlement program in history to mitigate that new burden.

Under the proposal, known to supporters as the FairTax, the Internal Revenue Service and the entire income and payroll tax system would be abolished. Americans would then pay a sales tax on virtually everything: a new home, yard work, food, health care. Only education would be broadly exempted.

FairTax advocates say a 23 percent tax rate would maintain the same amount of money flowing into the Treasury, though that number is debatable. An item priced at $1 would actually cost consumers 30 percent more, or $1.30. FairTax advocates say that amounts to a 23 percent rate, because 30 cents is 23 percent of the product's after-tax cost of $1.30.

To offset the burden on the poor, the FairTax system would send monthly checks to everyone in the nation, compensating for taxes paid up to the poverty level and ensuring that some minimum standard of living would go untaxed. The president's tax overhaul panel, in its final report, estimated that such a program would cost $600 billion to $780 billion a year, making "most American families dependent on monthly checks from the government for a substantial portion of their income."

But the biggest criticism is that the tax cannot be administered. Many economists say a black market would develop overnight, especially in the service sector.

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I am not sure that there would be that big a black market. For large companies, the danger would be too high. Actually the biggest burden would fall on marginal enterprises.

The Fair Tax has a fair number of proponents, Neal Boortz being the most public. I have not seen any polling that gauges Huckabee's support that is based on the Fair Tax as opposed to social issues which he has been more outspoken about. Whatever the merits of the Fair Tax, I think the likelihood of it being enacted are remote. I just don't see 60 votes in the Senate to support it.