Friday, December 7, 2007

Mike-em-Dum?

GOP Presidential candidate Mike Huckabee stormed into Iowa. He is up in the polls and might actually have a chance to stage an upset in our nation's first caucus. I don't think national politics has seen this much buzz since Joe Lieberman declared "Joe-em-dum".

And why not? This guy is here to address the real issues. What is on his platform? A constitutional amendment to outlaw abortion and to define marriage as between a man and a woman. Hey who needs State's rights there Johnny Conservative.

But even better is his idea of a Fair Tax. Every few years it seems that politicians jump on this bandwagon. The tax code is long and complicated. Damn near need a Ph.D to figure your taxes. I got an idea! How about a flat tax. Huckabee is suggesting this too. His platform would scrape the income tax system as we know it and replace it with a national sales tax. The news report I read is the national sales tax rate could be as high as 23 percent.

I have to tell you, I don't know if the flat tax is a good idea. Part of what the Internal Revenue Code does (other than as a revenue device) is it encourages certain good things. The first thing that comes to mind is charitable contributions. Now I don't mean to be a cynic but I think the generosity of many of my fellow Americans is certainly enhanced by their tax deductions every year. Will this continue if there is a national sales tax? Sure but logically not to the same extent. Who is going to pick up the tab for the services that these charitable organizations can no longer provide due to lack of funding? The government. That won't be cheap.

Plus the Code encourages companies to spend money (it also encourages them to stay in debt but we will leave that for another day). Say you are in the business of printing and you go and buy a nice printing press for 100K. Sure you need it to stay in business but that depreciation you get to take for the next seven years or so is a nice incentive to spend cash. Under this flat tax proposal you now get an additional 23K cost up front and no deduction to your gross receipts. Heck when you sell the printing press in a few years you will get hit with another tax due. It doesn't have a basis to offset the the money you bring it. Under Huckabee's plan the income tax laws don't exist!

You got a loss that you could normally deduct? Can't anymore. There's no income tax code. Oh well. Go drown your sorrows in a bottle of three dollar Bud. I mean $3.69 bottle of Bud.

Sell your home. Look out for the tax bill.

I fail to see how this is going to boost any economic activity. Sure people will have more money to spend but with taxes that high are they going to be able to?

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