Fair tax? Flat tax? Candidates tout novel plans.
Two want to abolish the income tax – and the IRS. Others say they'd renew the Bush tax cuts.
By Peter Grier | Staff writer of The Christian Science Monitorfrom the January 4, 2008 edition
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Washington - Tax reform is a perennial issue in presidential politics, and it may yet emerge as a key topic in the 2008 race.
So far, healthcare arguably has been the top domestic issue of the campaign, particularly on the Democratic side. But recession worries are beginning to push economic issues to the top of the list of voter concerns.
In addition, President Bush's tax cuts expire in 2010, and the eventual GOP and Democratic nominees are likely to sharply disagree as to whether they should be extended. And this election cycle features two candidates – Republicans Mike Huckabee and Ron Paul – who propose to eliminate the federal income tax.
"I'd like you to join me in the best 'going-out-of-business sale' I can imagine – one held by the Internal Revenue Service," says Mr. Huckabee on his campaign website.
Candidates' tax proposals – like all their line-by-line issue papers – can be seen as symbols of the image they want to project, as much as serious ideas about governing.
Huckabee and Mr. Paul have both positioned themselves as outsiders unbeholden to the powers in their own party. Elimination of the income and payroll taxes, and their replacement with a national retail "Fair Tax," would be a radical step, say experts.
Some economists have long held that a national sales tax would be a more economically efficient way of financing US activities. It would encourage savings, and discourage spending, for instance. It would eliminate deductions that skew the tax code.
But other economists point out that some of those deductions, such as the one for interest paid on home mortgages, are enormously popular. Sales taxes are regressive – that is, they affect the poor, who must spend a higher percentage of their income to live, more than the rich.
And there is debate over whether a 23 percent national sales tax, as called for by Huckabee, would raise enough money to replace the taxes lost. Some economists say the rate would have to approach 50 percent, particularly as Huckabee's plan also calls for a "prebate" cash subsidy for poor taxpayers.
The tax proposals of the other major Republican candidates are all generally GOP mainstream. All would make the Bush tax cuts permanent, for instance. All express interest in cutting taxes.
Mitt Romney, for one, would lower the corporate income-tax rate, in the name of making US firms more competitive in the world economy. He would also eliminate all taxes on interest, dividends, and capital gains for those with incomes below $200,000.
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