Presidential hopeful Mike Huckabee wants to impose a 23 percent federal sales tax on all Americans.
But the plan he endorses, called the fair tax, would also eliminate federal income taxes, as well as payroll taxes for Social Security and Medicare, capital gains taxes, corporate taxes — and the IRS.
“The first thing I’d love to do as president: Put a ‘going out of business’ sign on the Internal Revenue Service,” Huckabee declared at one presidential debate.
Proponents of the fair tax say it would increase the incentive to save by taxing money spent rather than money earned, eliminate loopholes in the tax code, and free taxpayers and businesses from the often costly task of preparing tax returns, the Los Angeles Times reports.
“What we would do with the fair tax is eliminate all the taxes on productivity, which means you could earn anything you want,” Huckabee said. “You wouldn’t be penalized for saving, earning, for having a capital gain, making an investment.”
To ease the impact of the sales tax on low-income families, proponents want to give individuals and families a “prebate,” a cash payment to cover the sales taxes on spending up to the federal poverty level.
This year, a couple with two children would have received $6,297, or $525 a month, according to the organization Fairtax.org.
But critics say the fair tax would largely benefit the wealthy, who save the largest share of their income. They also maintain that the tax would actually have to be significantly higher than 23 percent to maintain the government at current levels. Brookings Institute tax expert William Gale estimates the tax could be as high as 50 percent, which would likely lead to widespread tax evasion.
“It’s a crackpot plan,” Bruce Bartlett, a former Treasury Department official who opposes the sales tax, told the Times.
“Anyone who supports it should not be taken seriously.”
And Grover Norquist, head of Americans for Tax Reform, said campaigning for a national sales tax would be “political poison” for a presidential candidate.
But Fairtax.org has spent about $2.5 million to promote the idea in early primary and caucus states, and some observers say Huckabee’s support for the plan has helped lift him from the back of the presidential pack to the status of a front-runner.
Huckabee told a crowd in South Carolina in May: “I have a dream that one day in this country … April 15 will just be another beautiful spring day.”
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