As Mike Huckabee ramps up his 2016 presidential campaign, we’re going to hear him speak quite a bit about abolishing the IRS, eliminating income tax, and implementing a consumption tax that he and others call, “The Fair Tax.” Instead of having income tax, we would have a hefty national sales tax. Those who wrote the book on the idea (Neil Bortz and others) say it would be around 23%, but nearly all economists say the tax would have to be somewhere between 40%-60% to generate the same tax revenue our government brings in through the IRS.
Millions of American like the sound of this idea, because they imagine how great it would be if they didn’t have to pay income tax. In fact, if they only had to pay money when they spent it, they could control how little tax they pay by spending less and saving more. Most people see spending as evil and saving as righteous, so they think the Fair Tax is righteous, because it encourages “saving” (although saving beyond a certain point becomes hoarding, and the Bible condemns hoarding money – it never says that it’s any more righteous to hoard money than it is to spend it).
In fact, as these people anticipate the implementation of the Fair Tax, they might imagine how they will run out and buy all kinds of stuff before the tax goes into effect, so they need not buy anything for a few years after the tax is in effect, so they can save even more on their taxes. Do you know what happens when a whole nation does this? Let’s just call it the Mega-Depression. There will be a massive economic boom and inflation of prices (which comes from overwhelming consumer demand for a limited number of products) before the tax commencement date, and then the bottom will suddenly drop out (like 1929 again, but way worse) as people halt spending over the first few years the tax is in effect. The vast majority of businesses will close, and the prosperity we gained in the post WWII era will be forever lost.
And that’s just the first problem with the Fair Tax.
Next, the Fair Tax will inspire consumption of foreign goods. Do you need a new TV? Order it from a Canadian or Mexican company and have it shipped by UPS and save a third of what you would have to pay here. Do you want to buy a $30,000 car and save yourself $15,000 in Fair Tax? Drive to Canada (only several hours drive for nearly half of our population), trade in your old car there, and drive the new car home. Do you want to go on a $2000 cruise and avoid paying an extra thousand in Fair Tax? Don’t worry, cruise ship companies will relocate to Cancun (or a similar Caribbean destination), because those who don’t will lose customers to competitors who move there to take advantage of those looking to avoid paying taxes, which is just about all Americans. One might argue that Huckabee can make laws that keep us from doing these things, but that would be “big government” controlling our lives. One might argue that Huckabee will make us report all of our foreign purchases so they may be taxed. But to do so would require a large government agency to track our every purchase and jail us if we cheat the system. Such a “service” would ensure that our nation has enough “internal revenue,” but don’t call it the Internal Revenue Service, because Huckabee plans to abolish that.
On a moral level, the Fair Tax rewards hoarding. Conservatives have the belief that the rich can only spend their money or create jobs with it, and that the Fair Tax will discourage spending and incentivize them to create jobs. But the truth is the rich have proven that, after the Bush and Reagan tax cuts, they socked their tax savings away in gold, high-end real estate, oil futures, and investment gambling (short-selling and derivatives). They only create jobs with it when there’s enough consumer spending to buy the goods and services those jobs create, and there won’t be any of that after the Fair Tax goes into effect. Otherwise, they hoard their money, effectively keeping it out of the economy, while gambling it with each other in a financial game of King of the Hill.
Next, the Fair Tax is what economists call a regressive tax. In other words, the poor pay a much higher percentage of their income than the rich do. If someone earns $50,000 a year and has little choice but to spend 60% of their income on necessities and basic wants (rent and real estate are not Fair-Taxed), and the Fair Tax is 50%, they will pay $15,000 in tax, which amounts to 30% of their income. Today, a single male with no dependents or write-offs pays about 13% income tax, and one with dependents pays less than that. This would be a stifling tax increase for lower and median income earners (unless they buy everything from Canada). Meanwhile, the hedge fund manager who earns a billion dollars in a year, but “only” spends 10 million of it (1%), will pay 0.5% of his income to the Fair Tax, and he’ll have no income tax, not even on his dividends and capital gains. Plus, the rich can afford to travel the world and do most of their spending abroad, thus further avoiding the tax.
Also, the Fair tax is ungodly. In God’s nation of ancient Israel, God required that property owners pay a percentage of their wealth to meet the needs of others. There were no consumption (sales) taxes. If there had been consumption taxes, they would have been ineffective, because Israelites bought little from others, as they produced their own goods. God gave approx. 95% of the Israelites an inheritance of the nation’s land upon which they could grow their own food, build their own houses, and make their own items from the land’s resources. They were almost entirely self-reliant, because they possessed the means of self-reliance. In corporate America, most people go into the world with nothing and are fully dependent on the wealthy (this is where “dependency” comes from, not from welfare). They must convince the wealthy to give them jobs, hope the wealthy give them enough income, and when they need something, they have no choice to buy it from the wealthy, since they have no means with which to produce it themselves. Therefore, we have a consumption-oriented society that differs greatly from God’s produce-it-yourself society. Huckabee’s plan is to punish working class Americans for being dependent on the wealthy, even though it’s the wealthy who built the system; the wealthy will pay virtually nothing, while the working class will have to pay more to pick up their slack.
The idea of the rich paying virtually no taxes and the working class bearing the tax burden is nothing new. It has its roots in the Gilded Age (late 1800s), the supposed good old days when nobody paid income tax. So how did America pay its bills? Tariffs! The average tariff on an import was about 40%, so that’s like a 40% sales tax. And then when American companies were freed by the tariffs from having to compete with lower-priced imports, they could increase their prices charged to consumers. Preacher and three-time Democratic Presidential Nominee, William Jennings Bryan, called the tariffs “a subsidy from the poor to the rich;” the rich paid the lowest percentage of their income, since they hoarded so much of it, while the poor paid higher prices to the rich and paid the government’s bills. The result was impoverished people living in squalor despite working up to 100 hours a week (up to 60 for children), while Rockefeller, Carnegie, Mellon, Morgan, Vanderbilt, and many others comprised the wealthiest class of men any nation had ever produced. If that’s what you want the future of America to look like, vote for Huckabee and his so-called Fair Tax.
When the progressive Democrats finally took control of government under Woodrow Wilson, they lowered tariffs and implemented an income tax, so the rich would have to share in the tax burden, too. The income tax was originally not meant for all people, since lower income people paid a higher percentage of their wealth to tariffs. It was meant to provide a balance, and that balance still exists today. Not only do we still have some tariffs on imports, like Bush’s 8-30% tariff on imported steel that made all products consisting of steel more expensive to produce (I’m unsure if the tariff is still active), but we also have state sales taxes and excise taxes (such as the many taxes built into the price of gasoline). These are all regressive taxes in which those with lower incomes pay a higher percentage of what they earn. So the 47% of “moochers” who don’t pay income tax actually do pay taxes, and they pay a higher percentage of their income to those taxes than the rich do.
Mike Huckabee also likes to argue that a progressive income tax punishes those who work hard and rewards the lazy. Well, I have a lot to say about that. Here’s an excerpt from my book, “Rescuing Religion from Republican Reason” that addresses such claims and more:
Progressive Taxation
Not all Republican Christians will dispute what I’ve shared thus far. They’ll agree that taxation is necessary, and that having a system to meet people’s needs aligns with God’s will. But progressive taxation, in which wealthier people pay a higher percentage than poorer people, is where they draw the line. They label progressive taxation as “unfair” and, therefore, “stealing.” Some even call it a “punishment for success.” And they point to Bible passages as proof that everyone in ancient Israel paid the same percentage of their income. At first glance, this argument holds up well.
If our society were structured like that of ancient Israel, I would agree that a flat tax would be the way to go. But our society differs from theirs. And it’s these differences that I believe justify a progressive income tax. Here are the justifications:
1) The Bible actually did have a progressive system. But it only had two tiers. Those who inherited land upon which they could grow food and build houses paid it; those who lacked land did not. As I stated before, our society is more complex. American citizens are scattered across a broad spectrum of income levels. Therefore, it makes sense to have a progressive marginal tax rate system. A two-tiered biblical system would be impossible to implement, because there’s no sole criteria by which we can draw a line between the haves and the have-nots.
2) Ancient Israel did not have a system of corporate liability protection that legally stole from society, through bankruptcy, to enrich the wealthy (without liability protection there would be no corporations or stock market, but only sole proprietorships and partnerships, and companies would then be small and wealth kept in check). It’s only right that we balance this injustice with a progressive income tax system that takes money back from the wealthy to share with society. If our system can amplify disparity of wealth, then our system can be modified to lessen that disparity.
3) Wealth was far more evenly distributed in ancient Israel. Approximately 95% of Israelites owned land on which they could grow food, build houses, run businesses, and raise their families. In America, prior to the establishment of the Federal Housing Administration (FHA) in 1934 and Fannie Mae in 1938, only about 40% of Americans owned land. With 95% of ancient Israel’s population having similar wealth, a progressive system among taxpayers would have made little difference.
4) America does not have a Year of Jubilee to minimize its disparity of wealth, like ancient Israel did. Thanks to the Year of Jubilee, no one could acquire a lot of land, because it had to go back to the family who originally inherited it within 50 years. With limited land in an agrarian society, one’s ability to produce a family fortune was also limited. When ancient Israel adhered to God’s system, it lacked the disparity of wealth that America has today. Once they moved away from the system, however, and were ruled by kings, some of them, like Solomon, amassed great wealth and disparity increased.
5) Many American corporations grow wealthy through deceiving customers and sneak-charging. Others encourage their sales reps and marketers to lie. Even those who don’t still benefit from deception, because nearly all sales departments contain some liars. Meanwhile, some businesses engage in the deception of what I call salary slavery. They hire prospective employees on a salary instead of an hourly wage while telling them they’ll work a 40-45 hour week, and then they work them 60-70 hours a week while paying them no additional money for the extra hours worked. All of this is stealing. The government cannot micro-manage businesses enough to eliminate all of this deception. But it can tax corporate owners who benefit from it at higher rates and give some of their ill-gotten gains back to society.
6) If business owners make millions, then it stands to reason that they either underpay their employees and/or overcharge their customers. In other words, they fail to share with those who made them successful. Who’s to say that paying employees the minimum necessary to fill the position is righteousness? Perhaps righteousness is to pay them according to their contribution to the company’s success. Or perhaps it’s to pay them enough to support their families.
7) America, in a time of military crisis, can draft the lives of low income Americans to keep America safe and stable enough for the rich to prosper. It’s only right, then, that America can draft the excess wealth of the rich when the American soldiers and families who made such sacrifices find themselves in financial crises. Every family that’s been here awhile has sacrificed sons, daughters, mothers, fathers, sisters and brothers to the protection of the common good. And they may be called to make similar sacrifices in the future. America is a group effort. Yet, when the wealthy are confronted with progressive tax rates, some of them cry, “I did it all myself. I owe them nothing.”
8) Last, but certainly not least, progressive taxes are merciful:
Mercy Rates
Republican economists have argued that the rich and the poor should pay the same income tax rate, because poor people don’t stay poor from year to year and the rich don’t stay rich. They’ll site statistics that show a large number of people moving out of the bottom income quintile (the bottom 20% of income earners) into higher quintiles (even though there’s little income difference between the bottom and middle quintiles – those in the middle quintile earn an average of about $35,000 per year). These stats look this way, because many young people start with minimum wage jobs while still dependent on their parents during their high school and college years, then get better entry level professional jobs after college, and then some move up the ladder in their fields and their pay increases. However, not all low income earners move up the ladder, and not all can depend on their parents. In fact, some have children depending on them, so they can’t afford to pay the same tax percentage as the rich. In fact, without welfare assistance, they may not live long enough to have a chance to move to a higher quintile.
My first year after graduating college, I had an entry level job that paid just a little above minimum wage. I struggled to afford my studio apartment in an impoverished part of Nashville. I had student loans, a car payment (because I needed to get to work), and I had no furniture. I remember having nothing but bread and butter for dinner, because it was all I had in the refrigerator until payday. I would walk for exercise, because I couldn’t afford a gym, and I walked for 4 months with holes in the bottom of my sneakers, feeling the pavement with every step, before I finally saved up enough money to buy new ones. I found myself poor, despite all of my hard work, education, and total avoidance of drugs, alcohol, and even cigarettes.
Having studied economics in college, I was aware of flat-tax proposals to establish a rate of approximately 20% federal withholding tax for all people. I had previously favored such a tax, because it was fair. My experience in poverty shattered that view. There’s no way I could have afforded 20%. I would have had to give up heat, food and electricity in order to afford a flat tax. I then realized that lower tax rates for the poor are acts of mercy, or as I call them, mercy rates.
Conservatives may argue that I eventually escaped poverty and moved out of the lowest tax bracket. In fact, ten years later I owned a ranch house on 3 acres of land and enjoyed nice vacations and Eagles season tickets. But could I then build a time machine and go back ten years to my former self to share my money with him? Obviously, not. When I was poor, the fact that I might someday earn more was of no consequence to my survival at the time. I needed a mercy tax rate, and fortunately, our progressive tax system gave me one, so I could live to see better days.
Republicans look at the progressive tax structure backward. They see the low rates as the standard rates and the high rates as penalties for the rich. The truth is that the rich pay the standard rates, and the poor get mercy rates, since they cannot afford the standard rates. If the nation is going to tax its wealth, it will have to tax the people who earn that wealth; so the standard rate is the one that taxes most of the wealth, not most of the people. According to the 2010 Summary of Federal Income Tax Data, the top 1% of income earners earn 18.9% of the nation’s wealth, the top 10 % earn 33.8%, the top 25% earn 67.6% , and the bottom 50% earn only 11.75%. So the bottom ½ of the population earns less than 1/8th of the money, but the top 25% earns 2/3 of the money. It’s this money and these people who should pay the standard rate. Although, to be fair, the poorest of the top 25% only earned $69,126 in 2010, which isn’t a whole lot of money when trying to raise a family, so they deserve a little mercy in their tax rates, too. And that’s exactly what we do. We have a progressive tax structure that extends different levels of mercy to different income brackets. The poorest receive the most mercy, and the wealthiest receive no mercy because they lack nothing. Of course, since such a large percentage of the population gets mercy rates, the wealthy have to be taxed even more to cover the poor’s share. If our disparity of wealth wasn’t so great, our tax rates wouldn’t have to be so progressive.
The so-called “Fair Tax,” on the other hand, is merciless. It punishes the poor and working classes for losing the cut-throat game of corporate capitalism, as if failing to get rich is some sort of sin. Those who work in small ministries, social work, school cafeterias, and even small town police departments will bear the tax burden, while those who got rich off of workers’ backs and deceptive schemes (I have 20 years of corporate sales experience, so I know how much wealth is gained through lies) will nearly go tax free, so they can hoard more wealth and power. And worst of all, Mike Huckabee convinces Christians that this satanic scheme is Christ-like.
