presidential-debate

digg_url = ‘http://digg.com/2008_us_elections/The_411_on_the_GOP_talking_tax’;

I’ve noted before that nobody likes a partisan tax blogger.

But you also can’t talk about tax policy in any meaningful way without considering the political ramifications. So throughout the next year (oh my God, is it really a whole year?), I plan to visit and no doubt, re-visit, the tax stances of various political candidates. After all, taxes and the economy, are probably the most significant issues facing the political candidates, after Iraq.

The GOP candidates addressed taxes in a big way during their May 3 debate. Here are some highlights from the debate:

Senator John McCain (AZ) – Senator McCain originally voted against extending President Bush’s tax cuts but now supports extending them. His initial concerns about the bill were the lack of provisions relating to Social Security or controls on spending. He wants to repeal the AMT. He also suggests a $3,000 tax credit for people to be able to purchase health insurance. Like many of the other candidates, he supports a flat tax.

Governor Mitt Romney (MA) – Governor Romney touts a zero rate on capital gains, interest and dividends.

Senator Sam Brownback (KS) – Senator Brownback wants to consider a flat tax as an alternative. He suggests allowing a choice between the current tax code and the flat tax.

Governor Jim Gilmore (VA) – Governor Gilmore stressed that he ran in Viriginia on eliminating car tax and the result was the elimination of the tax. He says that he will do the same in this race by proposing the elimination of the AMT.

Governor Mike Huckabee (AR) – Governor Huckabee was touting what he calls a “fair tax”: flatter, fairer, finite, family-friendly. He wants to eliminate the IRS. He also wants to get rid of all capital gains including individual and corporate and rely on a consumption tax.

Representative Duncan Hunter (CA) – Rep. Hunter says that he wants to eliminate manufacturing taxes by eliminating “all taxes on Americans who will stay in the United States and make products and hire American workers.” This is consistent with his stance on immigration issues.

Governor Tommy Thompson (WI) – Governor Thompson believes that the AMT is our biggest problem and would have it repealed. He also suggests the creation of a flat tax to allow taxpayers “the option of paying whichever is least.” This is similar to Senator Brownback’s suggestion.

Representative Ron Paul (TX) – Rep. Paul claims that he wants to do away with the “inflation tax” though it wasn’t clear to me what that actually meant.

Mayor Rudy Giulani (NY) – Mayor Giuliani wants to reduce AMT. He also proposes a complete repeal of the federal estate tax, which he refers to as the “death tax” and suggests that the current federal estate tax scheme will result in “one of the biggest tax increases in history in 2011.”

Rep. Tom Tancredo (CO) – Supports the FairTax which appears to be some form of consumption tax together with the repeal of the 16th Amendment which states “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” In short, he wants to repeal income taxes.

Whew.

So here’s my take on the candidates: Most of them don’t seem to have any real plans for tax reform with the exception of Senator McCain who appeared (during the debate, at least) to have put the most thought into this issue.

I found it interesting that Giuliani was the only candidate to suggest repeal of the federal estate tax, which is a traditional GOP platform. However, under the current economy, many politicians have backed off of complete repeal, favoring a higher personal exemption instead, since the tax really affects the wealthiest of Americans.

The target audience seemed to be the middle class. Promises for reform largely centered on a fairer, more simple tax. This appears to be represented by the idea of a flat tax. I would personally be surprised to see that idea next year after the primary races because the notion of a flat tax, while a popular idea in theory, has never fared well in political races (think Steve Forbes).

This idea of a consumption tax is an interesting foray into tax policy. Europe has something similar (the VAT) but the US has never really seriously considered such an idea (other than for specific uses like gas tax). A consumption tax is the equivalent of a national sales tax and has, over the years, been panned as regressive. I’m curious to see whether it makes any real headway in the races this year.

Some of the ideas were so “out there” that they are clearly just rhetoric. I’m still not sure what Rep. Paul was talking about… inflation tax? Is that his complete tax reform platform?

And Governor Huckabee’s comments about the IRS are pretty innocuous. It won’t happen in the next few years, and if it does, it would largely be replaced with a similar government agency with another name (just like the INS being reincarnated as the BCIS and then the USCIS). Some agency somewhere has to collect and administer tax. We can’t just have a system where we mail checks to the Treasury and hope for the best. So, his thinking is largely to share buzz phrases that might appeal to folks frustrated with the current system. I’m thinking that’s as much play as that idea will get.

Rep. Tancredo’s espousal of the FairTax likewise makes me giggle. According to the web site, the plan will resolve all of our tax problems – ever. This includes issues with Social Security and Medicare. This is the result that we can expect:

Job creation booms. Residential real estate booms. Financial services boom. Exports boom. Retail prospers. Farming and ranching prosper. Churches and charities prosper. Civil liberties are enhanced. In short, it is difficult to imagine the far-reaching, positive effects of this change. Though this tax policy is exactly what our Founding Fathers counseled us to do with the Federalist Papers and the Constitution.

Right.

Hey, I don’t claim to know all of the answers. But then, I’m also not running for President. I think it’s fair to say that a lot of this talk at the debate was just that: talk. I suspect that real tax reform will not be the focus of this presidential race. But it sure makes for nice headlines.

{ 0 comments }