Still not ready for prime-time

July 31, 2007

It hasn’t dominated the Republican primaries thus far, but the majority of the GOP presidential candidates support scrapping the existing U.S. tax structure, replacing it with a consumption tax (which proponents call the “fair tax”). As part of the plan, all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare and self-employment taxes would be swept away. In its place, we’d have a large national sales tax.

As Josh Marshall recently put it, “I guess that’s the kind of thing that sounds great if you a) don’t know anything about tax policy or b) don’t care about progressive taxation. Really rich people spend a low proportion of their money; poor and middle income people spend a lot. It’s a really stupid idea.”

That’s true, but it’s a really stupid idea with a sizable and organized backing, built around FairTax.org. So far, the really stupid idea has been endorsed by John McCain, Mike Huckabee, Tommy Thompson, Tom Tancredo, and Duncan Hunter. (Rudy Giuliani and Mitt Romney said they’d think about it, but appear reluctant to endorse the policy.)

And then there’s good ol’ Fred Thompson, who last week was asked, on camera, by a FairTax.org supporter, whether he’d support their tax policy. “Yeah, absolutely,” Thompson said.

Today, Thompson and his aides started trying to wiggle out of it.

Former Sen. Fred Thompson, R-Tenn., appears to have flip flopped on his pledge to sign federal legislation replacing all federal taxes with a 23 percent sales tax, according to an unedited FairTax.org video reviewed by ABC News.

“He has not taken this pledge,” Thompson spokesperson Linda Rozett told ABC News.

The Thompson camp’s denial appears to be contradicted, however, by an unedited FairTax.org video in which Thompson is asked, “Senator, if the House and Senate pass the ‘Fair Tax’ bill would you sign it?”

Thompson replies to the question by saying, “Yeah, absolutely.”

What do you want to bet that Thompson endorsed a radical overhaul of the federal tax structure without having any idea what it means?

“Fred Thompson may have spoken without thinking. But the tape is accurate,” said FairTax.org spokesman Ken Hoagland.

It is, indeed. The clip is online, and you can see a FairTax.org backer approach Thompson at a campaign event. The guy made his pitch, and Thompson didn’t hesitate.

Now, chances are, Thompson isn’t the kind of person who keeps up on policy debates. I suspect he doesn’t read much (TV scripts don’t count), and doesn’t know what other candidates are saying about tax policy. When some guy he doesn’t know asked him if he’d support “the fair tax,” Thompson probably thought, “Taxes that are fair? Sounds great!”

But the incident is yet another reminder that Thompson is kind of clueless. In this case, he either a) knowingly endorsed a radical, right-wing overhaul of the tax system; or b) carelessly endorsed a radical, right-wing overhaul of the tax system without meaning it.

The DNC didn’t waste any time driving the point home.

The Democratic National Committee seized on the non-candidate’s apparent contradiction with his own staff, questioning whether the actor turned politician is qualified for the role of commander-in-chief.

“Fumbling Fred Thompson’s flip flop on the ‘Fair Tax’ issue shows once again that his presidential campaign is just not ready for prime-time,” said DNC spokeswoman Amaya Smith. “Next time Thompson should make sure that he’s on the same script as his advisors before changing his position on an issue.”

This probably won’t be the last time Thompson flubs a question like this. Call it a hunch.

Freddie’s campaign donations are even weaker than his grasp of tax policy.

I guess Family Values Newt is going to have to step up and save the Republican party from the evil Democrats. If he can get any money from das base…

  • I ain’t taken that bet….noooo way.

    Down here in Texas, that bet’s what we call “low hangin’ fruit.”

    It should be apparent by now that they guy is not only physically lazy but intellectually lazy, too.

  • A 23% sales tax? Are you kidding me? So the $1.00 item would be $1.23, the $10.00 item would be $12.30, the $100 item $123.00 – and the sales tax on a $25,000 car would hike the price to $30,750.

    Well, unless food is exempt from tax, I think this might be the answer to the national obesity problem…

    There are so many people who, directly or indirectly, make a living in some fashion because of the existence of the current tax system that this will never come to pass. Never.

  • Granted I’m not a tax expert but the Fair Tax includes a “prebate”.

    From the FAQ on the Fair Tax site:

    “All valid Social Security cardholders who are U.S. residents receive a monthly rebate equivalent to the FairTax paid on essential goods and services, also known as the poverty level expenditures. The rebate is paid in advance, in equal installments each month. The size of the rebate is determined by the Department of Health & Human Services’ poverty level guideline multiplied by the tax rate. This is a well-accepted, long-used poverty-level calculation that includes food, clothing, shelter, transportation, medical care, etc. See chart in Figure 1 below. ”

    Sounds pretty progressive to me.

  • Just wondering how China would feel about that sales tax approach. It would also hurt them badly. It’s not wise to piss off a banker to whom you owe a lot of money and from whom you wish to borrow more. IF American consumers still are the engine that drives the world economy, it sounds like a recipe for world depression and global trade war. Also sounds like an indirect way to destroy socsec, and the government , in general, outside of the beloved MIC, of course.

    This idea is right out of an ivory tower economics text. The Right has a real talent for turning a blind eye to obvious, but undesirable consequences. This idea is only slightly less appealing than global nuclear war.

  • What about going to a national land-value tax apportioned by appraisal with an exemption value for each person excluding corporate and foreign owners?

  • Some of the narrative at the Fiar Tax site made me laugh out loud – and not because it was all that funny, but because it was kind of ridiculous. All those people involved in the current tax system – the IRS workers, the tax lawyers and tax accountants and tax preparers, well, they would just have to find other, more productive, work. Hmmm…like what, exactly?

    Honestly, the whole site reads like propaganda – everything will be sunshine and roses under the Fair Tax plan…

    I think not.

  • My job is to legally reduce corporate income tax for finance companies and buyers of big equipment. Believe me I know what I am talking about.

    You can’t replace our current complicated tax system with any single simple system. The reason is that people will do everything they can to make their money not be ‘taxable income’.

    If you try and make a sales tax or a VAT then you will have everyone trying to show why their cash should not be taxed.

    Our income tax system is complicated because of the definition of ‘taxable income’. It isn’t complicated because of the changing tax rates.

    Come on, for most people, they look up the tax they owe on a table. They don’t even have to know anything about the tax rate. You made $75,234 then you pay $XXX tax. How hard is that?

    The problem is figuring out that you made $75,234.

    I seriously think the solution is to have a lot of little taxes so that it will be very difficult to avoid them all.

    Have a national gas/carbon tax.
    Have a national property tax
    Have a national personal property tax
    Have a national sales/VAT tax
    Have a national income tax.
    Have a national estate tax
    Have a national corporate income tax
    Have a national LLP/LLC tax
    If you need to raise $3 trillion then figure out the most efficient way to raise the money. If you had a $1 a gallon tax on gas, a .4% tax on real property, a .1% tax on personal property, a 5% VAT, a 10% income tax, a 15% corporate/LLC/LLP tax, and a 30% tax on estates over $4 million then you could probably raise the money you needed.

    I don’t claim my numbers add up but I can tell you that very few people like me would use our time trying to avoid a 10% income tax or a 15% corporate income tax.

    If we could get people like me to do something productive then we would all be better off.

  • Why is DNC spokeswoman Amaya Smith referring to this as the “Fair Tax issue”, as opposed to something like “the Republican Screw Everybody But The Rich tax proposal”?

    Next thing, she’s probably going to speak out in favor of “Healthy Forests” and “Clean Skies”. Framing is important here.

  • In an economy whos growth is based on getting an ever increasing number of people to buy an ever increasing quantity of goods this spells disaster for the folks who own or operate the factors of production, distribution and sales.

    Poor people are going to get screwed because they have to spend all of their money. Rich people get an unfair advantage because they spend a smaller percentage of their money anyway. BUT, the middle class ‘shop-till-you-dropper’ is going to step back and think twice in large numbers. If about half the folks who replace their $30,000 cars every five years decide to keep the old one for another 18 – 24 months rather than spend the $6,900 in additional tax the new $30,000 car market has just fallen off about 15%. The same logic and $$ apply to just about everything that isn’t absolutely necessary. The simple desire not to pay taxes is going to hit a very significant portion of the middle class.
    A flat 23% sales tax will turn a whole lot of the middle class spenders (on whom our economy depends) into savers and that will seriously hurt everyone whos income depends on selling non-essential goods.

    In about six months the new tax structure will have more loopholes than a fish net.

  • CNR@4
    Thanks for the clarification.
    The prebate is instrumental to progressive candidate Mike Gravel’s support of the Fair Tax. He also proposes charging teh sales tax on new goods only which are favored heavily by wealthy people. Rich PEOPLE may not buy much in the way of goods, but businesses do and the wealthy pay those taxes indirectly.

    Anne@3
    As far as progressivism goes, I’m inclined to include food, oddly enough.

    Tax on a meat and potatoes dinner can be progressive. Consider.

    Filet Mignon, potato stuffed with crab imperial, and a bottle of Cabernet Savignon = $50 tax = about 12 bucks.

    Hamburgers, baked potatoes, water = $3 tax = about 75 cents.

    Rich folk pay 16 times as much tax for their dinner unless they re-educate their palates. The pre-bate will cover the burger and tater. If not, increase it until it does.

    Can you imagine income tax being made 16 times as high????

    Point is moot, of course. As others have said, the current system was DESIGNED by the wealthy who claim to hate it so and there are lots of folks making their living from the nutty tax code we have.
    Besides, five years after the Fair Tax were passed, we’d see exemptions for yachts, SUV’s, and fur coats.

    Screw it, there’s no escape from regressive taxes until we get the guys who favor regressive taxation out of office.

  • Tax on food is never progressive, because even if the rich spend ten times as much on food as the poor, they will not go hungry if they cannot afford the tax.

  • Neil’s basically right.

    Think about a 23% tax rate on a high end Mercedes/Lexus/Land Rover/Lincoln or on your new house. D’ya think that the auto industry or the realtors might have enough juice to get exemptions written into the law?

    How about 23% on tuition and books? Food? Do you think you’d re-elect the guy who voted the tax in?

  • Wahoo, I think a national sales tax is an altogether bad idea. As you say, the rich will get exemptions through some corporate shenanegans. The poor will pay.

  • Some Frog commented in ‘Sicko’ that in France the government fears the people while in America the people fear the government.
    The Johnson and Nixon Administrations feared the people. American history since then has been the ‘priveledged’ classes reversing that trend. Give you any ideas? Shouldn’t the government fear us?

  • and the sales tax on a $25,000 car would hike the price to $30,750.

    but of course, car leases wouldn’t be considered a purchase and thus those who can afford to lease a vehicle would avoid paying any sales tax.

    what a crock. Hey Fairtax.org, forget your “prebate” calculations and just send back 23% (or whatever the rate is) * 50,000 to every household in America. And then provide a rebate of up to 11.5% (or half the rate) to people who can show they spent another $50,000. After that no rebate.

    Now that’s progressive. if you make $50,000 or less, no fed tax. If you make $100,000 or less you pay only $5750.

  • Fred Thompson’s voting record on the budget, spending, and taxes can be found at: Fred Thompson’s Voting Record

    Fred Thompson’s history of speeches on taxes can be found at: Fred Thompson’s Record of Speeches

    Fred Thompson’s ratings from special interest groups on budget, spending, and taxes can be found at: Fred Thompson’s Interest Group Ratings

    For more information about where all the 2008 Presidential Candidates stand on tax policy, please visit: Presidential Election 2008

    For more information please visit Project Vote Smart or call our hotline at 1-888-VOTE-SMART.

  • With respect to fellow progressives, the fair tax is worth consideration. Corporations and wealthy people have accountants and pay as little as possible now. There is a whole industry dedicated to not paying and it is legal.
    The prebate sounds like an idea McGovern had in 1972.
    Just because it is mentioned by loony-tune candidates does not mean it should be rejected out of hand. A little more study before commenting would be wise unless of course you love our present IRS. It is not supposed to be a jobs program.

  • Nevertheless, this helps to clarify who are the real wackos among the GOP candidates.

  • The Fair Tax is a “really stupid idea”?
    As Josh Marshall recently put it, “I guess that’s the kind of thing that sounds great if you a) don’t know anything about tax policy or b) don’t care about progressive taxation. Really rich people spend a low proportion of their money; poor and middle income people spend a lot. It’s a really stupid idea.”

    Yes, the Fair Tax IS a really stupid idea…..IF
    a) don’t know anything about tax policy (of course, who can understand the current code) or
    b) don’t care about progressive taxation (the people who spend the most money are the ones with the most money to spend — oh, those are “rich people!”). Really rich people spend a low proportion of their money (under the Fair Tax, it doesn’t matter if they spend a bunch of money, they won’t hide it in their mattress — it gets invested, and put back into the economy creating more jobs and thus creating more consumers. Even 1% of 5,000,000 spent at the retail level is almost twice as much as can be spent by the family of 4 earning at poverty level.); poor and middle income people spend a lot — that’s right, and its high time WE had some CHOICE in the matter. The Fair Tax will give us that choice of if, when, and how much tax we pay, based on how we choose to spend our money (the prebate untaxes necessities). Yeah, the Fair Tax sounds like a really stupid idea: fair, and freedom of choice. Sign me up.

    GET EDUCATED! OPERATION: OFF THE FENCE!
    http://www.OperationOffTheFence.org

  • You’re supposing, Marsha, that there will be no loopholes for the lobbyists? That the tax can be enacted by our congress and signed by our president without more holes than a swiss cheese?

    Aside from the fact that it will necessarily kill the high end car market, real estate and most luxury goods production and most likely create a depression it’s regressive – poor folk pay while rich folk play.

    Go find yourself a LARGE PRINT economics text and GET EDUCATED!

  • Them and Us
    Place a one one hundreth of one percent Value Added Tax on all capital flows.
    Them enrich themselves by taking a bite out of America’s capital flows at every instance while Us, the creator’s of this wealth, need Moms and Dads working multiple jobs to eat and provide the capital for this system.
    As our capital washes around the globe for economic enterprises, good and bad, hedging and currency (and other asset) speculation, there is no reason Us couldn’t charge a way tiny ‘rent’ for this resource.
    Social Security and Medicaid could thus be amply funded and capitalism would not miss a heart beat.

  • Thompson not only does not understand war, he does not understand economics. We should just get rid of income tax without replacing with with a consumption tax.

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