Tax gloves coming off in campaigns

On the heels of news that the guy that currently occupies the White House is considering more tax cuts, the topic is getting renewed focus as a 2008 campaign issue.

Matthew Mosk in The Trail, the Washington Post's campaign '08 blog diary, says:

Apparently, there's only room in the Republican presidential field for one candidate who wants to abolish the IRS. At least that seems to be the message in a new Ron Paul mailing in New Hampshire. The glossy flyer [below] from the Texas congressman and maverick presidential contender does not target the two Republicans who lead in the polls there (Mitt Romney and John McCain); it instead goes after Iowa caucus winner Mike Huckabee, calling him a "habitual tax hiker."

The Little Rock, Ark., CBS affiliate KTHV, however, says that "in wake of Iowa win, Huckabee pins New Hampshire hopes On tax plan." The station reports that the former governor's believes his 23 percent national sales tax proposal "is resonating with New Hampshire voters."

But just south of the Granite State, an opinion piece in the Boston Globe calls the Huckabee "Fair Tax" proposal "too good to be true." Bruce Bartlett, deputy assistant secretary of the Treasury for economic policy from 1988 to 1993, writes:

When people hear about a 23 percent national sales tax, they naturally equate it to the state sales taxes they are familiar with. If a state sales tax is 5 percent, then this means that if someone buys something for $1 they will pay $1.05 at the checkout. Thus they assume that the Fair Tax would cause a $1 product to cost $1.23 if it were to be enacted.

In fact, the rate is not 23 percent, but 30 percent. The 23 percent rate is arrived at by treating the tax as if it were already part of the price instead of being on top. Thus if a product were to sell for $1 and the Fair Tax added 30 percent, the 30-cent tax comes to 23 percent of $1.30. This is how a 30 percent rate is deceptively turned into a 23 percent rate.

Want more on political taxes? Sure you do!

The Christian Science Monitor takes a look at the various presidential tax plans in this story.

And, as blogged about earlier here, The Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution in Washington, has compiled a summary of the candidates' tax plans. You can view it via this PDF file, or click here to open up an Excel spreadsheet version.