A conversation with Mike Huckabee on Tax Policy
Today former Arkansas Governor and Presidential Candidate Mike Huckabee spoke at the Morris County Chamber of Commerce Annual Meeting. During a round-table session with Chamber's Board of Directors I had the opportunity to ask Governor Huckabee about his thoughts on our current tax system. Now, I am a self-admitted tax junkie - I am totally fascinated by how the tax system influences the economy and behavior and how little critical thought politicians on both sides of the aisle seem to give to it. So, I thought to myself, here is an opportunity to see what a former (?) politician would say about tax policy.
To paraphrase my question:
Governor Huckabee, here in New Jersey we are in the most expensive state to live in and the most expensive state to do business in from a tax perspective. How is it that the government's share in our work could be productive to our businesses instead of having a dampening effect?
Gov. Huckabee's first answer was to first invite me to move to Arkansas - apparently the tax environment is much friendlier. But all joking aside, he made some very insightful comments, which I thought I would summarize here:
- Corporate Tax does not exist. He expressed amazement of the fundamental lack of understanding in the American populations that corporations do not pay tax, they collect tax. Think about it - when there is a new tax on oil companies, gas prices go up; on food companies, food prices go up; on banks, bank fees go up. Taxes are a cost of doing business that is passed along to the ultimate consumers of good and services - you and me.
- A FAIR tax would jumpstart the economy. Gov. Huckabee said that he used to advocate a flat tax, but now advocates a FAIR tax. I have to say I am not a flat tax proponent (it is regressive - affects poorer people more as they must spend dollars on necessities - and anything to address the regressiveness takes away from from the simplicity of a flat tax) and I knew nothing about the FAIR tax until today. Gov. Huckabee explained it as a tax on consumption - you buy gas, you pay tax; you buy oil to make gas, you pay tax. It changes the tax from on productivity to one on consumption. He inspired me to go out and learn more - so more posts will be had on this subject. I will be visiting the FAIR Tax website today and reading The Fair Tax Book that Gov. Huckabee recommended.
- Eliminate tax penalties for bringing offshore dollars into the US as an immediate solution to our fiscal crisis. Right now, if you make money outside the US, you are taxed when you bring it into the US and potentially subject to penalties of 50% or more if you haven't previously reported the dollars. Gov. Huckabee estimated 130 billion in offshore dollars that US companies and taxpayers won't bring back into our economy because it costs too much. Eliminate those taxes and billions will flow into the economy from sources other than the US taxpayers pocket.
Gov. Huckabee shared that when he discussed the fair tax with his accountant he thought the accountant would dismiss the idea because it would put him out of work. The accountant replied that he would like the idea where he could spend his time helping companies build their businesses instead of figuring out what their fair share of tax is. I will read more on the subject and see if I agree.
I was just curious if you had taken the time to further check out the FairTax book or the website? In my opinion the current tax system is similar to an old car engine. By the passage of the recent tax bill Congress is doing a few things that would be similar to using higher octane gas and possibly replacing a couple of parts. It performs a little better but it is still the same old car engine. What is really needed is to throw out the old tax engine.
What is the real purpose of the tax system we now have? Is it to raise revenue? No. If it was then Congress would have lowered the tax rates. History shows (Kennedy, Reagan, Bush 43) that lowering the tax rates always raises the revenue to the government. It creates a flood of economic activity, thus generating much more revenue even with lower tax rates.
The real purpose of our current tax system is to allow government to control the behavior of the American people through the tax code. As a person who likes to invest in rental property I have always asked myself why there is so much emphasis on 401Ks, IRAs, etc. But the government doesn't encourage people to save or invest in rental property. Why isn't there a Roth for those who want to invest in rental property? The current system also allows Congress to dole out tax favors to their cronies. Our current system taxes income which is akin to punishing success.
The FairTax eliminates all of this type of corruption and favoritism. It is a consumption tax so everyone has some "skin in the game" but also provides a "prebate" so those at or below the poverty level do not pay any tax.
I would urge you to further check out the FairTax. I believe it is what this country needs to fix the terrible debt situation we are currently in. The current path we are on is unsustainable. It will bring real change if we don't act. In fact, it is bringing real change right now by our refusal to act, but probably not the change we are hoping to see.
Thank you,
Rick Sandberg
Fresno, CA