Mike Huckabee, former Republican governor of Arkansas and candidate for president, is wrong about most things.
He dramatically increased the size of Arkansas government. He uses populist, divisive, class warfare rhetoric; in 1997, he said that women should be subservient to their husbands. He has less foreign policy experience than Bush did in 2000.
But in his campaign for the presidency, he has gotten one thing right - along with former Senator Mike Gravel (D-Alaska), he supports FairTax and is the most vocal candidate standing in its favor. FairTax is a proposal to replace all federal taxes with a national consumption tax (sales tax) of 23 percent (or 30, depending on how you calculate it).
In order to prevent the sales tax from cutting into basic necessities, there is a "prebate" that every household will receive from the government at the beginning of the month to reimburse them for taxes paid on income up to the poverty level. For an individual, that would be $195 a month. For a family of four, it would be $525 a month.
No one understands the current tax code; it is over 60,000 pages long. Politicians know this, but they cannot help themselves. Congress simply must create a new tax break to encourage energy conservation or create more jobs or help some special interest. And in addition to regulating industries and spending money on programs, Congress is using the tax code to implement economic policy.
For example, if they want to see more ethanol jobs, then they create a tax break for companies that use it instead of just mandating a certain percent of ethanol use or giving ethanol-research grants. However, because the tax code is so complex, the individuals and businesses that get the tax breaks are those that can afford high-priced, creative accountants and lawyers. Your average taxpayer doesn't have the time or resources to take advantage of every deduction they might be entitled to.
In the short run, no tax reform can help everyone. Under FairTax, the very wealthy and very poor will benefit the most. The very wealthy who pay the top tax rate of 35 percent will pay less because the FairTax rate is only 23 percent. The very poor will pay less in taxes than they receive in their prebates. This will have a similar effect as the earned income tax credit does now, but everyone will be automatically enrolled. Under FairTax, some taxpayers in the middle will pay more in taxes than they are paying now.
However, in the long run, FairTax will encourage a strong economy to benefit everyone. Unlike the current tax system, FairTax will not distort prices. It won't help some businesses at the expense of others. Everyone will be treated equally. The U.S.'s corporate tax, which is the highest in the industrialized world, will be eliminated.
The multi-billion-dollar tax preparation industry will disappear. H&R Block alone makes $2 billion a year preparing taxes. Those individuals who previously made their living off of a complex, impossible-to-understand tax code will be forced to get productive jobs. Americans will save money.
Consumption will go down, and savings will go up. If you put a 23 percent tax on everything people buy, then they will buy less. There is no avoiding the reality that everything will become much more expensive under FairTax. The average American is currently spending beyond his means and has a negative savings rate. FairTax will encourage consumers to consume less and save more.
FairTax will encourage economic growth. It will save our economy billions of dollars in tax preparation. It won't distort prices like the current tax system. The proposal creates a fairer, simpler, more effective system of taxation than the monstrosity we have now.
Xander Zebrose is a sophomore who has not yet declared a major. He can be reached at Alexander.Zebrose@tufts.edu.
