Tuesday, July 31, 2007

Aaaaaaaaah whaddup blog.

1 comment:

Brian J. said...

Huck's Dumb Tax Conceit:
On January 15th on his International Affairs blog on the Financial Times website, Gideon Rachman outlined his support for Mike Huckabee's so-called "FAir Tax" idea. Rachman should stick to international affairs. Although formerly a writer for the respected "Economist" newspaper-- my favorite magazine- Rachman's advocacy for this idea is lunacy and uninformed. There are legions of Republicans that are attracted to the idea of abolishing the IRS, but the idea is repeatedly debunked by journalists because it is asinine. Rachman expressed surprise at the fact that most economists equate Huckabee's tax plan tot he "economic equivalent of creationism." Rachman says that "when I heard Huckabee explain his plan recently in a burger joint in New Hampshire, it sounded pretty good to me." Being able to discuss the nuance of the disastrous effects of a national sales tax hardly should be laid out at a burger joint, but if American wants to elect another "guy they wanna have a beer with" then sure, I'm surprised that soem of us can be convinced to abolish the IRS over a burger in New Hampshire. But for those of us who actually care, it's worth noting exactly how regressive and ill-conceived Huckabee's plan is. For one, estimates of exactly how high the tax would have to be range not at Rachman's low 23%-- but rather at least at 30% and range as high as 40%. If this doesn't encourage black market behavior, then I don't what wouldn't. An underground economy so sophisticated would develop that Congress would probably be forced to raise the rate even higher, in much the same way the high corporate tax rates have incentivized businesses to establish off-shore tax havens in the Caymans.

Then Rachman briefly addresses how Huckabee's "isn't that stupid" that he hasn't thought about the unbelievably regressive nature of his tax system, and says that anyone below the poverty line would not have to pay any taxes at all. Even if it is 200% the poverty line- which I think is Huckabee's plan-- what about the middle class?

Exactly, it's not discussed by Rachman at all because the answer is, as the conservative Wall Stree Journal noted, it would hit the middle class hard. Medical expenses and tuition would skyrocket, not to mention most goods and services, and there has been little discussion of the interruption to consumption and demand that this would produce. What sorts of perverse side effects would occur when all of sudden everything is much more expensive to buy, from a carton of milk to a car? The nuances of so drastic a plan have not been addressed by Huckabee or his supporters, and there's a reason why. Because it's total insanity. Rachman, wake up.