Sunday, January 06, 2008

NYT - Huckabee's Unfair Tax Plan

It is not the same as a normal sales tax, however. Under the proposal, the tax is included first. That means a $100 item would cost $130, or 30 percent more. The plan’s supporters say that works out as a 23 percent rate because $30 is 23 percent of $130. Americans would no longer face federal withholding from their paychecks. But most analysts say the tax rate necessary to replace current federal revenues, under any likely plan, would actually need to be much higher. By some estimates it could add 40 percent, if not more, to the cost of living.

Whatever the rate, critics say, a steep federal retail tax, piled on top of existing state sales taxes, would encourage widespread illegal tax evasion, black market transactions and other forms of cheating, creating a cycle that would require even higher tax rates.

“Even with the rebate counted the way FairTax supporters want it calculated,” said Bruce Bartlett, a conservative tax analyst and policy maker in the Reagan administration who has emerged as one of the proposal’s most powerful critics, “there would be an enormous shift in the tax burden from the wealthy to those with lower and middle incomes.”

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