Huckabee's "crackpot" Tax Scheme

[LaWood]

If you were a Xmas (Mithras) shopper how would you have enjoyed adding
30% to your purchases? Shopping for a new home; The median price in Ark,
last time I looked, was $186,000. Huck's tax scheme, called by the Tex. lunies who first pushed it, as The FAIR TAX, would add

($186,000 x .30) $55,800 to the purchase price. Ask your local Realtor about that. A main reason for our current mortgage crisis is that people were buying homes who could not raise the traditional down payment. Add 30% to the selling price of those homes and see how many buyers will qualify.

The Los Angeles times has more on Huck's crackpot scheme:

http://www.latimes.com/la-na-salestax24 ... ome-center

Oh, don't be fooled by Huck's tricky arithmetic. The simple per centage rate will be 30% then they go back and calculate the tax part of the transaction to the entire price which yields 23%.
.

[Barbara Fitzpatrick]

The cons - neo, theo, and corporo - all need an underclass to be superior to. And, of course, there wouldn't be a housing crisis if that underclass had been kept out of the housing market in the first place.

[LaWood]

Well, Huck's THIRTY PER CENT tax will keep more than the "underclass" out of the housing market.

Since it's a SALES TAX it must be paid at the point of sale. That means
the $55,800 (see above) will be tacked onto the down payment required.

Ask a Realtor how well that one will fly. Ask anyone in mortgage business. It should eliminate over half the qualified buyers, perhaps even more for the first 7-8 years should Huck's Luny Tax be instituted.

[Dardedar]

DAR
Do you pay sales tax on a home now? I don't think so. So this would certainly have a wavier. I am not for this regressive scheme and don't think it will ever amount to anything but it certainly isn't as cracky as the above info suggests. Note, from the LA Times article cited above:

"To ease the effect on the poor, they propose a "prebate" -- a monthly cash payment to every family -- to cover sales taxes on spending up to the federal poverty level."

D.

[Doug]

"To ease the effect on the poor, they propose a "prebate" -- a monthly cash payment to every family -- to cover sales taxes on spending up to the federal poverty level."D.

DOUG
Well, someone still has to pay for that prebate. The cost of the house is still a lot higher.

[Dardedar]

DAR
Do you pay sales tax on a home now? I don't think so. So this would certainly have a wavier.

DOUG
Well, someone still has to pay for that prebate. The cost of the house is still a lot higher.

DAR
Not if homes are exempt from the tax.

[LaWood]

See if there is any remote possibility of this Luny Tax working people will be lined up to get an exemption from this tax.
Homes
Autos
Building Materials
Food
Medicine

[Doug]

DAR
Do you pay sales tax on a home now? I don't think so. So this would certainly have a wavier.

DOUG
Well, someone still has to pay for that prebate. The cost of the house is still a lot higher.

DAR
Not if homes are exempt from the tax.

DOUG
You cited this:

"To ease the effect on the poor, they propose a "prebate" -- a monthly cash payment to every family -- to cover sales taxes on spending up to the federal poverty level."

If people are being paid to offset the tax, someone is still paying that money.

[Dardedar]

DAR said:
Not if homes are exempt from the tax.

DOUG
You cited this:

"To ease the effect on the poor, they propose a "prebate" -- a monthly cash payment to every family -- to cover sales taxes on spending up to the federal poverty level."

DAR
I quoted that in reference to my comment "it certainly isn't as cracky as the above info suggests" not as evidence against homes being taxed.

DOUG
If people are being paid to offset the tax, someone is still paying that money.

DAR
Not the poor, which at least is somewhat progressive.

Here is what I think. A flat tax has a near zero chance of getting any where. Huckster is using this (if he is still using this) as an easy way to make quick and easy flat-footed campaign points with his mouth breathing base by beating up on the IRS. Any flat tax scheme I have seen doesn't kick in until you have made money beyond a certain level making it somewhat progressive. Overall I think these plans are regressive. If we want to beat up on the huckster I am just saying to beat up the plan as it actually is. That said, I am really not that interested in reading up about because I think it is completely dead in the water (it requires amending the constitution apparently).

[LaWood]

Dar wrote:

Huckster is using this (if he is still using this) as an easy way to make quick and easy flat-footed campaign points with his mouth breathing base by beating up on the IRS.

Also he is attempting to ride in as the "outsider" which plays well among
Iowa conservatives and Southern conservatives too.

It's also to helpful to acknowledge Huckster's political strategy:

Iowa caucuses are ripe for harvesting extremists groups. Huck's latest group is "home schoolers" who have turned out in large numbers not from just Iowa either. Caucuses are not elections. I understand one can switch parties by simply going to another caucus.

As a rich garden for extremists Iowa has bumped up the campaigns of
Pat Robertson and Pat Buchanan in past election cycles. Those campaigns worked out really well.

You need only persuade about 27-30% of approximately 100,000 R caucus goers to support you to gain an Iowa victory. The whole thing is a sham.
It represents .1% of American voters.

[LaWood]

DAR
Do you pay sales tax on a home now? I don't think so. So this would certainly have a wavier. I am not for this regressive scheme and don't think it will ever amount to anything but it certainly isn't as cracky as the above info suggests.

Now for the rest of the story:

Huckabee’s Tax Plan Appeals, but Is It Fair?

"They succeeded. “Am I running for president to shut down the federal government? Not exactly,” Mr. Huckabee says on his Web site. “But I am running to eliminate all federal income and payroll taxes. And I do mean all — personal federal, corporate federal, gift, estate, capital gains, alternative minimum, Social Security, Medicare, self-employment.”

Next the BIG Lie:

“Instead,” adds Mr. Huckabee, who demonstrated his appeal to voters with his victory on Thursday in the Iowa caucuses, “we will have the FairTax, a simple tax based on wealth.”

Under the plan, Americans would pay only one federal tax, which would be applied to just about everything they buy: not just the goods people buy at stores on which most states assess a sales tax, but nearly all services, including health care and insurance, the purchase of a new home or rental of an apartment, even things like a teenager mowing a lawn or baby-sitting for a neighbor."

http://tinyurl.com/yox7fk
.

[Dardedar]

nearly all services, including health care and insurance, the purchase of a new home...

DAR
Here is how that could be nullified for everyone except the quite "rich."

We just bought a house for $240,000. Tax that at 23% and you get $55,200. Subtract that from my yearly income and this lowers my income enough to produce a big fat rebate check. The rest gets financed I guess.

Page two from your NYT's link:

"Like any tax on consumption, the biggest burden, comparatively, would fall on the poor. To help compensate for this, the plan would provide a monthly check from the government to every American household, rich and poor alike."

But this flat tax is fantasy and going nowhere. I agree with the article's last statement:

“The notion that there is a 23 percent rate that solves all our problems,” he said, “is politically unrealistic and mathematically impossible.”

[LaWood]

We just bought a house for $240,000. Tax that at 23% and you get $55,200. Subtract that from my yearly income and this lowers my income enough to produce a big fat rebate check. The rest gets financed I guess.

You should re calculate the potential Luny sales tax on your home. You are using Huckmath. The actual rate is 30% (see above) which would yield $72,000 in sales tax on your home. Keep in mind the sales tax is a point-of-sale tax and would be due at the closing, in addition to down payment, and any other incidental expenses.

Actual tax: $240,000 x .30 = $72,000.

Huck math:
Total price including tax ($240,000 + $72,000) = $312,000.

$72,000/$312,000 = .23

See how they construct the lie of TWENTY THREE PER CENT?

[Dardedar]

See how they construct the lie of TWENTY THREE PER CENT?

DAR
No. One way takes into consideration that you don't pay income taxes and the other way does. Here is how the Fairtax folks explain it:

***
The FairTax Rate: a 23% tomato or a 30% tomato?

05/31/2007

As the FairTax gains more national attention, questions have again arisen about whether the FairTax rate is 23 percent or 30 percent. In the toxic environment that often accompanies public policy debates, FairTax.org has even been accused by some of misleading the public, even though full descriptions of "tax-inclusive" and "tax-exclusive" calculations abound on our Web site. We hope the following explanation puts all such questions to rest -- at last.

Let’s use an example to illustrate the difference between tax-inclusive and tax-exclusive tax rates.

Assume there is a worker named Joe who earns $125 and spends all of his earnings. Let’s further assume that the government requires him to pay $25 in taxes.

If the government put a tax on Joe’s income, he would earn $125 before tax and would have $100 after tax to spend at the General Store. Thus, Joe has to earn $125 to have $100 to spend. Joe would also have to file an income tax return.

If the government put a tax on what Joe spends, he would earn $125 and would have $125 to spend at the store. Of the $125 paid by Joe to the storekeeper, $100 would be for the goods he bought at the store and $25 would be taxes that the storekeeper would send to the government. Joe would not have to file a tax return, as the storekeeper sends the tax in to the government.

Either way, Joe pays $25 in taxes and the government gets $25 in taxes. With a tax on income, Joe pays the $25 directly to the government, and with the tax on spending (sales tax), he pays the $25 in taxes indirectly when he buys something from the General Store. The General Store sends the tax that Joe paid to the government.



We may report the tax rate as $25/$125 = 20 percent, which is the tax-inclusive rate (meaning that the tax is included in the base). Alternately, we may think of the tax rate as $25/$100 = 25 percent, which is the tax-exclusive rate (meaning the tax is excluded from the base). The 23 percent FairTax rate set out in HR 25/S 1025 is a tax-inclusive rate, as is the current personal income tax, whereas most state-level sales taxes are quoted on a tax-exclusive basis. For ease of comparison, FairTax.org gives the tax rate both ways. Both rates are relevant, since the FairTax is replacing an income tax system, and 23 percent correctly represents the tax burden compared to the current system.

To review some of the research that determined a 23% (inclusive) rate is correct, please read Taxing Sales Under the FairTax: What Rate Works? This paper is a collaborative effort of 5 respected and independent economists.

LINK

DAR
Personally I think the idea is completely unworkable. For one, it would create an instant and massive black market. Also, the idea that we would go from the current situation where home ownership has huge tax incentives (home interest deduction) to a situation where people would take a massive hit if they bought a home (try adding interest to the cost of that tax after you have to fold it into the home loan!) is completely untenable. There is no way homes (and many other things) would NOT be waived from the tax. But it will never get that far.

[Dardedar]

DAR
This Salon article rips Huckabee's Fair Tax plan a new one:

***
Mike Huckabee wants to abolish the IRS

His loopy tax plan would be an economic disaster -- but it's more honest than the schemes being peddled by the establishment Republican candidates.

Excerpt:

"...both conservative and liberal economists believe the real rate would end up even higher. Estimates of the actual rate of taxation required for the FairTax to be "revenue neutral" (meaning for it to bring in exactly the same amount of revenue that the federal government collects under the current system) start at 30 percent and keep climbing. William Gale of the liberal Brookings Institution think tank says it's a de facto 44 percent sales tax. Calculations go still higher once you add in all the necessary and politically inevitable exemptions on big-ticket items -- like a new home or hospital care. Congress' Joint Committee on Taxation, which draws members from both parties and both houses, says the real rate would be 57 percent. (And this leaves aside the enormous federal outlay required by the "prebates," which even FairTax advocates say would cost the government $485 billion per year.)"

Bonus quote:

"Basically, trying to explain why the Fairtax is a bad idea is like trying to explain why having trained elephants perform open-heart surgery on every first-grader in America is a bad idea. The whole idea is one bit of lunacy stacked upon another, so when you focus on any one element of it, you let the other side suck you into into arguments about details — Maybe there could be benefits to preemptively fixing the hearts of six year olds! Perhaps elephants do have the potential intelligence to one day perform this task!! — that inadvertently make the plan sound semi-credible."
--Jon Chait