If one was looking for fiery, crowd pleasing, political rhetoric from former Speaker Newt Gingrich as he addressed CPAC today, they were likely disappointed. What Gingrich did do was run through a litany of policy solutions he claimed he has committed to implement immediately upon taking office in January of 2013.

Contrasting an America that can versus an America that can’t, Gingrich compared America’s speed and might in winning WWII versus her current inability to seal its own border. In a lighter moment, the former Speaker contrasted the efficiency of package tracking by Federal Express with the government’s inability to track illegal immigrants, suggesting sending each one a package may be the best way to apprehend the latter.

He also mentioned repealing Obamacare, Dodd Frank, and Sarbanes Oxley on his first day in office. He stated his desire to be a “paycheck president” versus a “food stamp president,” a term he used to denigrate Barack Obama.

Calling for a Fall campaign focused on substance, Gingrich also mentioned eliminating the Capital Gains tax and implementing 100% expensing for all new equipment written off in one year to help get the economy growing. Additionally, he called for a modernization of the workforce, proposing that unemployment compensation be linked to business training programs to avoid paying people for 99 weeks “for doing nothing.” (more…)

Leftists want higher tax rates and they want greater tax compliance. But they have a hard time understanding that those goals are inconsistent.

Simply stated, people respond to incentives. When tax rates are punitive, folks earn and report less taxable income, and vice-versa.

• When tax rates increase, sometimes they engage in tax avoidance, lowering their tax liabilities legally.
• When tax rates change, sometimes they choose to alter their levels of work, saving, and investment.
• And when tax rates go up, sometimes they resort to illegal steps to protect themselves from the tax authority.

In a previous post, I quoted an article from the International Monetary Fund, which unambiguously concluded that high tax burdens are the main reason people don’t fully comply with tax regimes:
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Let me build on Charles Krauthammer’s great Friday column, “The GOP’s Suicide March.” Krauthammer argues that just as President Obama’s class-warfare, soak-the-rich mantra started lagging in the polls, some Republicans on the campaign trail started making the case that Mitt Romney’s Bain Capital was involved in nothing more than vulture capitalism, looting companies, and destroying jobs. Keeping class envy alive.

I’m not going to name names, because everybody knows who these Republicans are. Instead, I want to go positive, and commend Mitt Romney himself. Romney did his best in the second South Carolina debate to fight for free-market capitalism and Adam Smith, and against the spread of Obama-style crony capitalism and class envy.

During the Thursday night debate, Romney launched this:

“You’ve got to stop the spread of crony capitalism. [Obama] gives General Motors to the UAW. He takes $500 million and sticks it into Solyndra. He stacks the labor stooges on the NLRB so they can say no to Boeing and take care of their friends in the labor movement. . . . He has to bow to the most extreme members of the environmental movement. He turns down the Keystone pipeline, which would bring energy and jobs to America.

“My view is capitalism works. Free enterprise works. . . . There’s nothing wrong with profit, by the way. That profit went to pension funds, to charities. It went to a wide array of institutions. . . . And by the way, as enterprises become more profitable, they can hire more people. I’m someone who believes in free enterprise. I think Adam Smith was right. And I’m gonna stand and defend capitalism across this country, throughout this campaign. I know we’re going to get hit hard from President Obama, but we’re gonna stuff it down his throat and point out that it is capitalism and freedom that makes America strong.”

Whoa. Tough stuff. The right stuff.

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The designer of Ronald Reagan’s economic plan is endorsing former Speaker Newt Gingrich for the Republican nomination for president. Arthur Laffer, chairman of Laffer Associates, and the Laffer Center for Supply-Side Economics, also co-authored “Return to Prosperity: How America Can Regain Its Economic Superpower Status” (Threshold, 2010) with Stephen Moore, senior economics writer for the Wall Street Journal editorial page, and a member of the Journal’s editorial board.

Mr. Laffer, who plans to join Mr. Gingrich in Iowa on Thursday for a formal announcement of his endorsement, said, “Newt has the best plan for jobs and economic growth of any candidate in the field.”

Mr. Laffer added:

Like Ronald Reagan’s tax cuts and pro-growth policies, Newt’s low individual and corporate tax rates, deregulation. and strong dollar monetary policies will create a boom of new investment and economic growth leading to the creation of tens of millions of new jobs over the next decade. Plus, Newt’s record of helping Ronald Reagan pass the Kemp Roth tax cuts and enacting the largest capital gains tax cut in history as speaker of the House shows he can get this plan passed and put it into action.

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Alan Blinder has a distinguished resume. He’s a professor at Princeton and he served as Vice Chairman of the Federal Reserve.

So I was interested to see he authored an attack on the flat tax – and I was happy after I read his column. Why? Well, because his arguments are rather weak. So anemic that it makes me think there’s actually a chance to get rid of America’s corrupt internal revenue code.

There are two glaring flaws in his argument. First, he demonstrates a complete lack of familiarity with the flat tax and seemingly assumes that tax reform simply means imposing one rate on the current system.

Here’s some of what he wrote in a Wall Street Journal column.

Many useful steps could be taken to simplify the personal income tax. But, contrary to much misleading rhetoric, flattening the rate structure isn’t one of them. The truth is that 100% of the complexity inheres in the definition of taxable income, which takes up millions of words in the tax laws. None inheres in the progressive rate structure. If you don’t believe that, consider the fact that the corporate income tax is virtually flat once a corporation passes a paltry $75,000 in taxable income. Is it simple? Back to the personal tax. Figuring out your taxable income can be quite an effort. But once that is done, most taxpayers just look up their tax bill on an IRS-provided table. Those with incomes above $100,000 must perform a simple calculation that involves multiplying two numbers together and adding a third. A flat tax with an exemption would require precisely the same sort of calculation. The net reduction in complexity? Zero.

I can understand how an average person might think the flat tax is nothing more than applying a single tax rate to the current system, but any public finance economist must know that the plan devised by Professors Hall and Rabushka completely rips up the current tax system and implements a new system based on one tax rate with no double taxation and no loopholes.

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There were three winners in the CNBC debate: Herman Cain, Mitt Romney, and Newt Gingrich. Gov. Rick Perry was the obvious loser because of his memory lapse.

The guy with the toughest job on Wednesday night was Herman Cain, who has been hammered by sexual-harassment charges. He needed a strong performance to put him back on message with his 9-9-9 tax plan and pro-business, free-enterprise views. I give him first prize, simply because he performed so well. He had the most to gain and the most to lose. He gained.

How these sex-harassment charges play out remains to be seen. And how much damage they will do to the Cain campaign is an unknown. But it’s noteworthy that a new Rasmussen poll for the Florida Republican primary shows Cain at 30 percent, Romney at 24 percent, and Gingrich at 19 percent. At the moment, Cain is still at or near the top of the pack. So far, it’s hard to find any Republican-voter migration away from Cain.

But the more interesting story might be Newt Gingrich, who has surged into third place. When I interviewed him on Tuesday, the night before the debate, I asked him about 1 percent versus 99 percent, the class-warfare argument being propagated by President Obama and the Wall Street protesters. Gingrich replied, “I am for 100 percent. I think this idea of 99 percent and 1 percent is grotesque European-socialist class-warfare bologna.” (Italics mine.) No one puts it that well.

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Mitt Romney is still flip-flopping even as he seems ever more confident of the Republican nomination. Rick Perry is breathing life into his campaign, after his poor debate showings, with his new flat tax plan, which has been fairly well received. Herman Cain, the intelligent, accomplished, and optimistic man he is, nevertheless is encountering flip-flopping problems of his own, particularly around his stance on abortion and the question of the number of “9’s” in his economic plan. Ron Paul, polling the strongest he ever has over the years, still needs to convince more Americans that the elimination of major agencies of the federal government won’t make the country fall apart. Michele Bachmann may be fizzling out, despite her conviction to repeal Obamacare, and Rick Santorum, another individual of strong conservative convictions, still can pull ahead.

And from the shadows of what is called his “personal baggage,” former House Speaker Newt Gingrich is gradually rising. Turns out Mr. Gingrich had a flat tax plan way before Mr. Perry, one that is favored by many conservatives/libertarians because of its flat 15% tax rate, as opposed to Mr. Perry’s 20%. Speaker Gingrich provides a comparison of both his and Rick Perry’s plans on his website.

An informal poll taken at Hot Air on Tuesday shows that Ron Paul’s economic plan garners 56% of voters’ support, followed by Newt Gingrich’s plan at about 25%. Rick Perry’s plan received about 9% of the vote, and Herman Cain came in with about 7%. Mitt Romney’s more complicated plan received under 2% of the vote.

We are now coming to terms with the fact that none of the Republican candidates for President are perfect. Many of us like different qualities in each of them and would like to “build” our own candidates from various components. We soothe ourselves a bit by considering the matrix of presidential/vice-presidential ticket possibilities. Perhaps if we pair them up, we can get the best qualities of at least two of them? But really, there can only be one President. (more…)

Governor Perry made significant strides toward producing a pro-growth tax proposal with his announced “Cut, Balance, and Grow” economic plan. Unfortunately, his plan has some glaring deficiencies.

(1) It is NOT strictly a flat tax and will SHRINK the tax base. The $12,500 personal deduction per individual provides an enormous advantage to large households at all income levels. Further, if a Head of Household of a family of four makes $50,000, he would have NO federal income tax liability under Gov. Perry’s plan. This will dramatically shrink the federal tax base even more than it has under President Obama. If Gov. Perry wants to restore an ownership society where every individual is a taxpayer and has a stake in his or her government, this plan will not accomplish that.

(2) This plan is guaranteed to balloon the deficit in the short term. By allowing taxpayers to choose a tax regime, Gov Perry is guaranteeing every taxpayer a tax-break. As a taxpayer, I say “great”! Unfortunately, Gov Perry does not plan to balance the budget in the short term, and our creditors will want their money back eventually, so we will be piling on to a $16 trillion debt when Pres Obama leaves office.

(3) The reduction in the corporate rate is insufficient to stimulate growth substantially. While I applaud Gov. Perry for recognizing that the corporate tax rate needs to be reduced, most states add another 5%+ or so of state corporate income tax, making a corporation’s effective rate 25%+. That is not enough of a reduction to encourage US corporations to relocate operations from countries like Ireland where they are taxed at 12.5%. (more…)

Governor Rick Perry of Texas has announced a plan, which he outlines in today’s Wall Street Journal, to replace the corrupt and inefficient internal revenue code with a flat tax. Let’s review his proposal, using the principles of good tax policy as a benchmark.

1. Does the plan have a low, flat rate to minimize penalties on productive behavior?

Governor Perry is proposing an optional 20 percent tax rate. Combined with a very generous allowance (it appears that a family of four would not pay tax on the first $50,000 of income), this means the income tax will be only a modest burden for households. Most important, at least from an economic perspective, the 20-percent marginal tax rate will be much more conducive to entrepreneurship and hard work, giving people more incentive to create jobs and wealth.

2. Does the plan eliminate double taxation so there is no longer a tax bias against saving and investment?

The Perry flat tax gets rid of the death tax, the capital gains tax, and the double tax on dividends. This would significantly reduce the discriminatory and punitive treatment of income that is saved and invested (see this chart to understand why this is a serious problem in the current tax code). Since all economic theories – even socialism and Marxism – agree that capital formation is key for long-run growth and higher living standards, addressing the tax bias against saving and investment is one of the best features of Perry’s plan.

3. Does the plan get rid of deductions, preferences, exemptions, preferences, deductions, loopholes, credits, shelters, and other provisions that distort economic behavior?

A pure flat tax does not include any preferences or penalties. The goal is to leave people alone so they make decisions based on what makes economic sense rather than what reduces their tax liability. Unfortunately, this is one area where the Perry flat tax falls a bit short. His plan gets rid of lots of special favors in the tax code, but it would retain deductions (for those earning less than $500,000 yearly) for charitable contributions, home mortgage interest, and state and local taxes.

As a long-time advocate of a pure flat tax, I’m not happy that Perry has deviated from the ideal approach. But the perfect should not be the enemy of the very good. If implemented, his plan would dramatically boost economic performance and improve competitiveness.

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The latest Gallup poll pegs President Obama’s approval at a new low of 41 percent. That adds to the thought that the winner of the GOP presidential-primary sweepstakes is going to be the next president.

And inside that Republican contest, the policy pendulum is swinging toward pro-growth, flat-tax reform. A new agenda. With Herman Cain’s 9-9-9 plan and the announcement of a Steve Forbes-type flat tax from Gov. Rick Perry, the GOP flat-tax-reform competition is dominating the headline news.

While President Obama stumps for huge tax hikes — on incomes of $200,000 to the millionaire and billionaire level — and demoralizes businesses and entrepreneurs with his populist attacks on success and risk-taking, the GOP is fast coming up with a much better idea.

The handwriting is now on the wall. A huge part of the 2012 campaign will be pro-growth tax reform versus “fairness,” redistribution, and soak-the-rich. In a stalled-out economy, I’ll take the supply-side bet anytime. Pro-growth, flat-tax reform is going to win.

The stock market gets this. The flat tax is bullish. In late September, Herman Cain trumpeted his 9-9-9 flat-tax/fair-tax hybrid reform plan at the Orlando, Fla., debate. Since early October, stocks have come out of their funk, rising 12 percent.

Coincidence?

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss why an unprecedented 26 million Americans are underemployed, Rick Perry’s flat tax, and Steve Jobs’ appeal to Barack Obama to free our education system from the teacher unions.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

An Unprecedented 26 Million Americans Are Now Underemployed
A long, steep drop for Americans’ standard of living
US ‘Misery Index’ Rises to Highest Since 1983
Second Miracle in 15 Years Needed for U.S. as Productivity Wanes
Texas Gov. Rick Perry calls for a flat tax
Steve Jobs Biography Reveals He Told Obama, ‘You’re Headed For A One-Term Presidency’
What if the NFL Played by Teachers’ Rules?
Will Charter Schools Cure America’s Blues?

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Herman Cain is the only GOP presidential candidate who wants to kill the tax code. That’s right. Put a knife in it. Junk the entire system. And people are cheering as he rises in the polls in his quest for the nomination.

Cain’s 9-9-9 plan is not perfect. But then again, the good should never the enemy of the perfect.

Congressman Paul Ryan gives the plan a thumbs-up. Supply-side mentor Art Laffer tells me it would be “far, far better than the current system.” And Chris Chocola, president of the free-market Club for Growth, calls it “a truly revolutionary tax reform that would amount to a massive job-creating tax cut on investments, savings, and income.”

As the world now knows, 9-9-9 translates to a 9 percent income-tax rate, a 9 percent value-added net sales tax rate on business, and a 9 percent national sales tax overall. Like many conservatives, I am troubled by the national-sales-tax piece. It reminds me too much of Europe. It could start low and then build on top of the other taxes. But I totally support the first two nines on personal income and business. In my view, these are vast improvements.

For his part, Cain argues that the sales-tax nine would pick up revenue and help to lower the rate for everybody, especially the middle class. His economic adviser Rich Lowrie told me in a CNBC interview that the sales tax is a replacement tax, not an add-on tax like you’d find at the state level. This is a key point. Lowrie said, “All we are doing is pulling out taxes that are invisible. We’re cutting the rates. We’re putting them back in at lower rates.”

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We’re hearing an awful lot about the “wealthy” paying “their fair share” where taxes are concerned. Pres. Obama and his Progressive and liberal Democrat brethren have perfectly coordinated their talking points to affect a campaign of undefined and reckless class warfare against the productive class, doing so for the sole purpose of political gain. Expectedly, Mr. Obama presents a Janus face: denying out of one mouth that he is utilizing class warfare; demonizing the producers out of the other.

In announcing his new, but all too familiar, deficit reduction plan on September 19th, Mr. Obama said:

“This is not class warfare, it is math…All I’m saying is that those who have done well, including me, should pay their fair share in taxes…We can’t just cut our way out of this hole… It is only right we ask everyone to pay their fair share…We can’t afford these special lower rates for the wealthy. We can’t afford them when we are running these big deficits… Middle class taxpayers shouldn’t pay higher taxes than millionaires and billionaires. That’s pretty straightforward. It’s hard to argue against that…”

Of course, an honest man would admit that the federal government is spending way, way, way beyond its means. An honest man would admit that the federal government has gone far, far, far beyond its constitutional mandate in providing special interest programs that would be better suited for private sector benevolence organizations. An honest man would acknowledge the fact – the fact – that the federal government, now hijacked by the political correctness of Progressivism, has ventured into social engineering via its “social justice” campaign and departed, to a great degree, from the vision of federal government established by our Founders and Framers.

But, that would be an honest man and honest men. We, here today, are dealing with opportunistic politicians, whose primary goals are to retain power (and by any means possible) and to “fundamentally transform the United States of America.”

Which brings me back the points I want to address: What is anyone’s “fair share” of taxes when our tax code is not only a progressive tax code (oh, the irony), but rife with special interest exemptions, limitations and write-offs? Who decides what constitutes someone’s “fair share”? And for that matter, who defines who is “wealthy” or “middle class” or “working class” or “poor”?

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It’s hard to keep track of all the tax hikes that President Obama is proposing, but it’s very simple to recognize his main target – the evil, nasty, awful people known as the rich.

Or, as Obama identifies them, the “millionaires and billionaires” who happen to have yearly incomes of more than $200,000.

Whether the President is talking about higher income tax rates, higher payroll tax rates, an expanded alternative minimum tax, a renewed death tax, a higher capital gains tax, more double taxation of dividends, or some other way of extracting money, the goal is to have these people foot the bill for a never-ending expansion of the welfare state.

This sounds like a pretty good scam, at least if you’re a vote-buying politician, but there is one little detail that sometimes gets forgotten. Raising the tax burden is not the same as raising revenue.

That may not matter if you’re trying to win an election by stoking resentment with the politics of hate and envy. But it is a problem if you actually want to collect more money to finance a growing welfare state.

Unfortunately (at least from the perspective of the class-warfare crowd), the rich are not some sort of helpless pinata that can be pilfered at will.

The most important thing to understand is that the rich are different from the rest of us (or at least they’re unlike me, but feel free to send me a check if you’re in that category).

Ordinary slobs like me get the overwhelming share of our income from wages and salaries. The means we are somewhat easy victims when the politicians feel like raping and plundering. If my tax rate goes up, I don’t really have much opportunity to protect myself by altering my income.

Sure, I can choose not to give a speech in the middle of nowhere for $500 because the after-tax benefit shrinks. Or I can decide not to write an article for some magazine because the $300 payment shrinks to less than $200 after tax. But my “supply-side” responses don’t have much of an effect.

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Since it is tax-filing season and we all want to honor our wonderful tax system, let’s go into the archives and show this video from last year about the onerous compliance costs of the internal revenue code.

Narrated by Hiwa Alaghebandian of the American Enterprise Institute, the mini-documentary explains how needless complexity creates an added burden – sort of like a hidden tax that we pay for the supposed privilege of paying taxes.

Two things from the video are worth highlighting.

First, we should make sure to put most of the blame on Congress. As Ms. Alaghebandian notes, the IRS is in the unenviable position of trying to enforce Byzantine tax laws. Yes, there are examples of grotesque IRS abuse, but even the most angelic group of bureaucrats would have a hard time overseeing 70,000-plus pages of laws and regulations (by contrast, the Hong Kong flat tax, which has been in place for more than 60 years, requires less than 200 pages).

Second, we should remember that compliance costs are just the tip of the iceberg. The video also briefly mentions three other costs.

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One of my many frustrations of working in Washington is dealing with perpetual-motion-machine assertions. The classic example is Keynesian economics, which is based on the notion that you magically create additional economic activity by having the government spend money instead of allowing the private sector to decide how it gets spent (in an especially bizarre display of this thinking, Nancy Pelosi actually said that subsidizing unemployment was the best way to create jobs).

Another example of this backwards analysis can be found in the debate over the IRS budget. The President is resisting a GOP proposal to modestly trim the IRS’s gargantuan $12.5 billion budget and his argument is that we should actually boost funding for the tax collection bureaucracy since that will mean more IRS agents squeezing more money out of more taxpayers.

Here are some excerpts from an Associated Press report about the controversy.

Every dollar the Internal Revenue Service spends for audits, liens and seizing property from tax cheats brings in more than $10, a rate of return so good the Obama administration wants to boost the agency’s budget.House Republicans, seeing the heavy hand of a too-big government, beg to differ. They’ve already voted to cut the IRS budget by $600 million this year and want bigger cuts in 2012. …IRS Commissioner Doug Shulman told the committee Tuesday that the $600 million cut in this year’s budget would result in the IRS collecting $4 billion less through tax enforcement programs. The Democrat-controlled Senate is unlikely to pass a budget cut that big. But given the political climate on Capitol Hill, Obama’s plan to increase IRS spending is unlikely to pass, either. Obama has already increased the IRS budget by 10 percent since he took office, to nearly $12.5 billion. The president’s budget proposal for 2012 would increase IRS spending by an additional 9 percent — adding 5,100 employees. …Obama’s 2012 budget proposal for the IRS includes $473 million and 1,269 new positions to start implementing the health care law.

Unlike Keynesian economics, there actually is some truth to Obama’s position. The fantasy estimate of $10 of new revenue for every $1 spent on additional bureaucrats is clearly ludicrous, but it is equally obvious that many Americans would send less money to Washington if they didn’t have to worry about a coercive and powerful tax-collection bureaucracy that had the power to throw them in jail.

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Here’s a video arguing for the abolition of the corporate income tax. The visuals are good and it touches on key issues such as competitiveness.

I do have one complaint about the video, though it is merely a sin of omission. There is not enough attention paid to the issue of double taxation. Yes, America’s corporate tax rate is very high, but that is just one of the layers of taxation imposed by the internal revenue code. Both the capital gains tax and the tax on dividends result in corporate income being taxed at least two times.

These are points I made in my very first video, which is a good companion to the other video.

There is a good argument, by the way, for keeping the corporate tax and instead getting rid of the extra layers of tax on dividends and capital gains.

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The internal revenue code is nightmarishly complex, as illustrated by this video. Americans spend more than 7 billion hours each year in a hopeless effort to figure out how to deal with more than 7 million words of tax law and regulation.

Why does this mess exist? The simple answer is that politicians benefit from the current mess, using their power over tax laws to raise campaign cash, reward friends, punish enemies, and play politics. This argument certainly has merit, and it definitely helps explain why the political class is so hostile to a simple and fair flat tax.

But a big part of the problem is that tax lawyers dominate the tax-lawmaking process. Almost all the decision-making professionals at the tax-writing committees (Ways & Means Committee in the House and Finance Committee in the Senate) are lawyers, as are the vast majority of tax policy people at the Treasury Department and the Internal Revenue Service.

This has always rubbed me the wrong way. Yes, some lawyers are needed if for no other reason than to figure out how new loopholes, deductions, credits, and other provisions can be integrated into Rube-Goldberg monstrosity of existing law.

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In my fiscal policy speeches, I sometimes try to get a laugh out of audiences by including a Powerpoint slide with this image. Leading up to this slide, I talk about the Armey/Forbes flat tax and explain that it would eliminate the corrupt internal revenue code and replace it with a simple 10-line postcard. But I then warn that simplicity is not the same as low taxes and show the Obama slide.

But maybe jokes about Obama tax reform were a bit premature. According to the New York Times, the White House is giving serious consideration to a sweeping plan to streamline the tax system.

While administration officials cautioned on Thursday that no decisions have been made and that any debate in Congress could take years, Mr. Obama has directed his economic team and Treasury Department analysts to review options for closing loopholes and simplifying income taxes for corporations and individuals, though the study of the corporate tax system is farther along, officials said. The objective is to rid the code of its complex buildup of deductions, credits and exemptions, thereby broadening the base of taxes collected and allowing for lower rates — much like a bipartisan majority on Mr. Obama’s debt-reduction commission recommended last week in its final blueprint for reducing the debt through 2020. Doing so would offer not only an opportunity to begin confronting the growth in the national debt but also a way to address warnings by American business that corporate tax rates and the costs of complying with the tax code are cutting into their global competitiveness.

There’s actually much to like in the Administration’s potential plan. Lower tax rates will help the economy by improving incentives for productive behavior. And getting rid of distortions will further enhance growth since people no longer would have an incentive to make inefficient decisions just for tax purposes. And simplification could have a profound impact on cleaning up the horrible mess at the IRS. Moreover, a plan that trades lower tax rates for fewer tax distortions would be a welcome change from the poisonous soak-the-rich tax policy the White House has been pursuing.

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In the past 15 years, I’ve debated in favor of a national sales tax, testified before Congress on the merits of a national sales tax, gone on TV to advocate for the national sales tax, and spoken with dozens of reporters to explain why the national sales tax is a good idea. Even though I prefer the flat tax, I’ve been an ardent defender of sales tax proposals such as the FAIR tax because it would be a great idea to replace the current system with any low-rate system that gets rid of the tax bias against saving and investment. I even narrated this video explaining that a national sales tax and flat tax are different sides of the same coin – and therefore either tax reform proposal would significantly improve prosperity and competitiveness.

I will continue to defend the FAIR tax and other national sales tax proposals that replace the income tax, but I wonder whether this is a losing battle. Every election cycle, candidates that endorse (or even say nice things about) the FAIR tax wind up getting attacked and put on the defensive. Their opponents are being dishonest, and their TV ads are grossly misleading, but they are using this approach because the anti-FAIR tax message is politically effective. Many pro-tax reform candidates have lost elections in favorable states and districts, largely because their opponents were able to successfully demagogue against a national sales tax.

The Wall Street Journal reaches the same conclusion, opining this morning about the false – but effective – campaign against candidates who support a national sales tax.

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