Plus [Huckabees's] idiotic regressive tax ideas will never fly.
Actually, that tax is
far more progressive than what we have now. Here is the very short version (which still provides a long post - sorry).
It eliminates
all federal taxes and replaces them with a consumption tax. The tax is inclusive, representing 23% of a products entire cost. For example, a loaf of bread cost $2.00. The grocer records $1.54 as revenue, and remits $0.46 of tax.
Currently, with our wide variety of taxes, an average of 22% of the production costs of all goods is federal taxes. All of those costs are eliminated, thus reducing the cost of goods by an average of 22%. On a loaf of bread that currently costs $2,00, let's assume the grocer currently makes a reasonable margin of 20%, or $0.40. That would mean that the cost is $1.60. Now, reduce that $1.60 by 22%, and the cost drops by $0.35 to $1.25 (think of how much this would help exports – not having taxes built into the cost of our goods and services). Now, let's once again price in a 20% margin for the grocer, which brings us up to $1.56. With the cost and profit making up 77% of the total price, the cost of the loaf of bread to the consumer becomes $2.02.
But, you no longer have ANY federal taxes taken out of your paycheck. If you gross $45,000, you take home $45,000 (less any state taxes). Further, everyone receive a tax pre-bate. This is based on the poverty level for your household. Assuming our person making $45,000 is an individual, the poverty level is about $10,000. The tax pre-bate would be $2,300, which would be received in as $192 at the beginning of each month. If this person spend every dime he makes, he would pay a total of 10,350 in federal taxes, which, less the pre-bate, comes to $8,050 in all federal taxes.
Under our current tax system, that same individual would pay $3,443 in social security and medicare taxes, plus, using the standard deduction, another $5,530, which comes out to a sub total of $8,973. Then, add to that all other federal taxes he pays. Just using gasoline, if he drives 15,000 miles and makes 20 mpg, there is another $135. The telephone taxes would be another $200, energy taxes another $300. We are now up to $9,608, or about $1,558 more than under the plan Huckabee supports. Those at or near the poverty level are completely removed from the tax rolls, rather than still being stuck with the 7.65% they currently lose in payroll taxes even if they pay no income taxes.
While the poverty stricken are completely removed from the tax rolls, our middle class guy making $45,000 is subject to a tax burden of 17.9%. Under the current system, his tax burden is 21.4%. The super wealthy, such as Warren Buffett, currently pay about 17.7%, which would jump to almost exactly 23% - about a 30% increase in their tax burden.
In short, the Huckabee tax plan reduces the tax burden on those in poverty by 100%, our middle class guy by 16%, and increases the burden on the wealthy by 30%. It is a progressive tax plan, and much more progessive than what we have now.There are other benefits as well:
-- Better able to compete globally as we level the playing field by having taxes post production as opposed to embedded in production. Further, the 22% cost reduction will be further enhanced by not having the cost of tax planning and compliance. According to the Congressional Budget Office, business decisions based on tax planning rather than economic planning cost us 18% of our GDP each year. For me, this is the biggest benefit – getting the taxes post production. When Germany exports a BMW to the US, it eliminates its post production Value Added Taxes, making their cars relatively inexpensive compared to our lesser cars that have 22% more embedded into the production cost. Our workforce is still the most productive in the world, and the elimination of the payroll tax burden alone will make US labor 8% cheaper than Mexican labor.
-- Corporate income taxes are eliminated. Corporations will flock back to America for the cheaper labor productivity, and the relative tax haven. I despise most corporate taxes. When dumbo says she's going tax Exxon for it's huge profits (which are about ½ the profit margin of retailers) people cheer. They are oblivious to the fact that she is taxing their retirement account. FWIW – for sales in the US, the federal taxes collected on gasoline are more than twice the profits on gasoline sales for all oil companies combined. The federal subsidy payment to Archer Daniels Midland was more than the gasoline profits of all oil companies combined. Every $1 of profits for ADM cost the US taxpayers $30, and a certain individual who lost the 2004 election want to quintuple the subsidies to ADM.
-- Moves a higher burden of taxes to visitors and illegal aliens, who otherwise contribute virtually nothing to the tax revenue base. Everyone who buys anything in the US pays the tax. When all the Europeans come to visit, 23% of everything they spend goes into the federal coffers. The same for the illegals.
-- No more PACs buying tax breaks and influence. Greatly eliminates the use of the tax code by those running for office as a means of buying votes. Taxes are eliminated as a campaign issue (which is why PACs and those seeking office just for power, and want to use the tax code to buy votes, hate this plan).
Some of the misleading statements by those striving for political office for the wrong reasons try to finagle numbers, using the following math:
23% of the purchase price is tax, meaning 77% is revenue. 23% / 77% = 30% tax.
But this is an inclusive tax, like payroll taxes and income tax. Those trying to play down the plan conveniently try to treat is as an exclusive tax, while saying the income and payroll taxes are inclusive If you want to compare that way, lets take the 28% income tax bracket and the 7.65% social security and medicare withholdings. The total payroll and income taxes total 35.65%. Using the same math:
35.65% of the paycheck is taxes, meaning 64.35% is personal income. 35.65% / 64.35% = 55.4% tax – and that's before all the other BS federal taxes.
Other things that some say that are misleading is that its a 30% tax on top of what you pay right now, which is not correct. They say the loaf of bread will cost you $2.60, which is blatantly false. It still cost right around $2.00. They also leave out that the reason for this is that the embedded taxes are eliminated, reducing the cost. Further, they leave out that your take home pay grow dramatically as the payroll and income taxes are eliminated. Further, your electric, phone, gasoline, and all other expenses which have federal excise taxes will fall.
There are some flaws. But this handles the biggest problem we face with our asinine tax code - embedded taxes, while still staying progressive - much more progressive than what we have now. I'd rather see the pre-bate doubled, and the tax rate increased 1% to more than compensate, making it even more progressive. But, compared to what we have now, this is still untold thousands of times better.
