Democracy for Vancouver

Pay no taxes

There is an article in the Guardian Unlimited today about Mike Huckabee’s proposed Federal tax reform. Low and behold it sounds virtually identical to Mike Gravel’s proposal. If anyone knows which Mike crossed the road first, please let me know in the comments.

As with any major tax reform, there would be major difficulties getting this passed and major difficulties with implementation.

Right off the bat I noticed that exports would be exempt from the consumption tax:

Businesses and exporters wouldn’t pay the tax, which would be assessed on health care spending, food, rent and new housing. Education spending would be exempt as it’s deemed an investment.

So that means people living near the borders would have a major incentive to cross over to avoid the tax.

The article also mentions that the underground economy would be wiped out by this tax reform.

To hear Republican presidential hopeful Mike Huckabee tell it, a national sales tax is the panacaea that will end America’s economic woes. It’ll boost American exports, end the rule of lobbyists in Washington, destroy the underground economy of drug dealers, pimps, and prostitutes, and best of all, he says: “April the 15 becomes just another pretty spring day.”

I gather that is because the profits would be spent on goods and services upon which the dealer, pimp, prostitute would be taxed. Unless I am missing something, there would still be an underground economy (in other words people would still deal drugs, etc.), they would just have to charge more for the drugs and services to pay the extra taxes on their big mac and Porsche. But the people buying the drugs would not have to pay any taxes on the money they legitimately earn so that seems like a wash. And if the drug dealer happens to send the money back to their relatives south of the border, taxation would be escaped altogether, uh oh.

I’d love it if I no longer had to pay social security, medicare or income taxes. And since I am not much of a spender, I would probably do better than most with a consumption tax.

And there are good reasons to want to tax consumption more and savings less from a fiscal and environmental policy perspective.

But getting something like this passed would be tantamount to eliminating funding for the Department of Defense.

I do find it interesting that both a Republican and a Democratic candidate are pushing the same program, both of them quite likely to lose of course.

But buyer beware! Every time the tax code has been messed with in a major way over the last 40 years or so it always results in the average guy and gal ending up on the s@#t end of the stick. But of course that is not how it is “sold” to us.

“We don’t pay taxes. Only the little people pay taxes.” Leona Helmsley