Huckabee wants a 23% Federal sales tax?

The more I hear about Mike Huckabee’s policy proposals, the more I think he’s a bad choice for running the country, let alone representing anyone in our Federal government.

Huckabee campaigning for 23% sales tax – Los Angeles Times

WASHINGTON — Mike Huckabee, one of the most conservative Republicans in the 2008 presidential race, has embraced one of the most radical ideas on the campaign trail: a plan to abolish all federal income and payroll taxes and replace them with a single 23% national sales tax.The idea — dubbed the “fair tax” by proponents — has been a political asset for Huckabee; its well-organized backers have helped catapult him from the back of the presidential pack to its top tier.

Proponents of a national sales tax say it would be an improvement over the current system because it would increase the incentive to save, by taxing money spent instead of money earned.

Also, the proposal would rid the tax code of its myriad loopholes and would free taxpayers and businesses from the time-consuming, often costly task of preparing annual tax returns.

“What we would do with the fair tax is to 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.”

Huckabee and call for a 23% tax on virtually all purchases in place of federal income taxes, as well as payroll taxes to fund Social Security and Medicare.

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.

Is the “fair tax” fair? Maybe. But does it solve other problems in our tax system, or does it make them worse? I think it makes things worse. I don’t understand how this will be easier on regular people, save the government money, or cut down on bureaucracy.

First, this plan is missing one critical element. It doesn’t make the tax system easier on the regular, everyday person. We’ll have more money in our pockets but will pay a 30% (or higher) tax. Not only that, but we’ll need to deal with another bureaucratic mess to get whatever rebates the government sees fit to give out.

Secondly, the “prebate” program will be tasked with paying people rebates for everything they spent. This will invite huge amounts of fraud. I can easily see a black market developing to match poor people who don’t use up their entire rebate with rich people who easily used up their rebates. I can also see a “you scratch my back, I’ll scratch yours” barter system developing in place of regular commerce similar to how some lower wage persons work “under the table.” There is some incentive in today’s state-based sales tax programs, but those incentives will become much larger when 1/4 to 1/3 of a purchase price is added at the end as tax. For example, in California I’ll end up paying a 31.25% (23% + 8.25%) tax for every purchase I make.

Finally, a huge bureaucracy will need to be created in place of the IRS to manage the “prebate” program, develop eligibility criteria, investigate and manage fraud, and process all the paperwork submitted. All those folks freshly laid off from the IRS will be hired to staff this new tax agency.

Other issues that will need to be worked out including how to deal with people and companies who made financial plans based on expected taxes. Also, what about services and groceries? Some groceries are exempt in states that charge income tax. Would that continue under a federal system.

In the end, I believe the national sales tax is not a replacement or substitute for the Federal income tax system currently in place. If anything, it might make make feelings of an inherent sense of unfairness felt by poorer people, as well as create a less manageable system.

I am more amenable to a flat tax with no loop holes such as credits, deductions, or accounting trick rewards. A flat tax can be eased in over 25-30 years by making it optional for all those who have worked full-time more than two years consecutively and make it compulsory for those who haven’t. It can also be equalized in favor of poorer people by taxing only income over first 25,000 (or some other arbitrary number).

Done, sort of.

I just submitted my paper. It was due by 11:59pm via email. I sent it at 11:58pm, according to the sent folder in my school email account.

I will still need to tidy the paper up during the break, but otherwise I’m done with the semester. What a semester. I’ll never consider taking seventeen units again. I stretched myself thin as cellophane trying to keep up.

I’m flickering like the flame of a spent candle. The candle that is just a millimeter long wick and a few drops of liquid surrounded by a discard heap of melted wax.

Now to catch up on sleep, bills, and deferred chores such as cleaning and bill filing. Oh, and some fishing.

Running on empty

I’m metaphorically Running on Empty. That song is now running through my head.

I have a 30 page paper due at 5pm tomorrow. I have 27 pages and a dearth of footnotes. I told myself I’d stop researching last month but just found a paper that parallels mine.

I’d love to stick around but I’m running behind
You know I don’t even know what I’m hoping to find
Running into the sun but I’m running behind…

Turn off the Greenspan double-speak machine

Alan Greenspan has been hawking his book lately. The more I hear him, the more I’m convinced he doesn’t know what he’s talking about and never did. His doublespeak constantly reminds me of 1984. With that in mind, maybe his goal is to confuse people into inaction.

“We are beginning to get not stagflation, but the early symptoms of it,” Greenspan said.

So he’s saying is we’re seeing the early signs of stagnant inflation (stagflation) in the economy.

Greenspan sees early signs of U.S. stagflation: Financial News – Yahoo! Finance

In an interview on ABC’s “This Week with George Stephanopoulos,” Greenspan said low inflation was a major contributor to economic growth and prices must be held in check.”We are beginning to get not stagflation, but the early symptoms of it,” Greenspan said.

“Fundamentally, inflation must be suppressed,” he added. “It’s critically important that the Federal Reserve is allowed politically to do what it has to do to suppress the inflation rates that I see emerging, not immediately, but clearly over the intermediate and longer-term period.”

I think Greenspan shares a lot of the blame for this inflationary spike and impending stagflation, if it occurs. He led the Fed down a interest rate cutting path that created the cheap money high that resulted in the housing bubble as a knee-jerk reaction to a soft recession in the economy after the dot-com bloodbath/implosion and the 9/11/2001 terrorist attacks. Economies operate in cycles with highs and lows. The recession we had was a natural part of that cycle. Instead of letting the recession play out, the Fed intervened by slashing interest rates to almost nothing. Instead of giving time between each rate cut to see if the previous rate cut was working, the Fed kept slashing. That kept the U.S. economy out of recession but it created unsustainable inflation in the housing market, and it likely made this next recession a bloodier mess. It makes me think that the Fed was operating with the short-term vision Wall Street is famous for pushing on public companies. In contrast, the Fed needs to keep the long-term health of the economy in mind, even if it might hurt a little before then.

Speaking of the Fed, Congress needs to do its job to provide some oversight over the Fed to make sure it isn’t pandering to a particular lobby and isn’t cooking the books. It is after all a quasi-government organization that has been assigned the task of a central bank. Oh wait, Congress already panders to a particular lobby (the one with fistfuls of dollars, euros, and pounds) and doesn’t bother to keep the books. Nevermind.

Time to turn off the Greenspan double-speak machine and ignore anything it says.

Video: Human Tetris

I love Japanese variety show skits and games even though I don’t speak/understand Japanese. This one is particularly hilarious: Human Tetris. Well worth the few minutes you spend watching it.

I’m punchy after studying too much. For some reason, I brought this video up to my wife and even partially acted it out. Now I’ve decided to post it.