Thursday, January 3, 2008

The Iowa Caucus Is Finally Here

After months of hype, thousands of television ads, Oprah, and tens of millions of dollars spent, the Iowa Caucuses are here. Tonight, we'll know (or not) whether the Democratic establishment succeeded in overcoming the surge of Barack Obama and John Edwards to keep Hillary Clinton at the front of the pack and whether the team of a floating cross (or was it a conveniently lit IKEA bookshelf?) and Chuck Norris can overcome the millions of dollars spent by Mitt Romney.

I've talked at length previously about why I think Barack Obama is the best choice to lead not just the Democratic Party, but country, and bring the change we desperately need while (unlike Senator Clinton) being able to work with Republicans and Independents to get it done, so I'll just say one more thing. It's almost ironic, that the reason why a lot of Iowans and others are hesitant to support Obama is not his policies or his inexperience (really) but they fear he isn't electable. After Al Gore and John Kerry, Democrats are so desperate for a win, and the only Democrat to win in my lifetime, and the lifetime of a lot of Democrats, was Clinton. Barack Obama, though, is infinitely more electable than Hillary Clinton. Just take one look at the head-to-head polls. Hillary is a toss-up, or worse, against most Republicans. Obama is a clear winner. Now, the Clinton campaign will say that's because her negatives are so high because she's had to fight off Republican attacks since 1992, and Obama's numbers will dip once the Republicans get a hold of him.

I don't believe it, and you shouldn't either. No Republican in this race, not one, is as tough, or as calculating, or runs as ruthless a campaign (and ruthless is not always bad in politics, so that word probably sounds more negative than I mean it to be) as Hillary Clinton, and she's had a really hard time knocking Obama off-stride. If she and her campaign and the Clinton machine can't do it, no Republican will be able to. And just look at how Obama will win Iowa, if he wins Iowa. It's by bringing an extraordinary number of independents and even some Republicans into the Democratic world to vote for him. That won't just help him win the Iowa Caucus, it will help him win the state of Iowa in the 2008 Presidential Election, a state the Democrats haven't won since 1996. And it will help him win all across the country. Hillary Clinton will never get that kind of broad-base support. She's a 50% + 1. Barack Obama could unify a nation. And that's not hyperbole. Obama isn't just the smart choice policy wise, he's the right choice politically looking toward the general election. Let's hope Democrats in Iowa wake up this morning feeling the same way.

On the Republican side, Mike Huckabee has the momentum, but Mitt Romney has the on-the-ground organization, and probably will squeak by because of that if I had to guess. But, as everyone keeps saying, Huckabee is a great politician and a great communicator. He spent, at most, $500,000 in Iowa. Mitt Romney spent at least $8 million, and likely closer to $10 million. It's an amazing spread considering Huckabee is leading going into tonight's vote. I watched Huckabee on the Tonight Show tonight and he was great. I don't know if I agree with his plan for a "Fair Tax" (national sales tax) in place of the income tax, but the way he explained it, it's hard not to get on board. I still can't vote for him, for any number of reasons (his stances on guns being the most blatant, but his disbelief in evolution is up there too) but it's hard not to like the guy, and if Hillary Clinton gets nominated, there is not a more perfect Republican candidate to take her down than Huckabee. I know most Democrats relish the chance to take him on, thinking he'll be an easy foil in November, but I wouldn't be so quick to celebrate should he win. He may win Iowa, despite being outspent 20-1 for a reason.

I'll be posting here tomorrow night, a night I plan on spending watching MSNBC all night. With a team like Keith Olbermann, Chris Matthews, Howard Fineman, Eugene Robinson, Andrea Mitchell, Pat Buchanan, Norah O'Donnell, Joe Scarborough, and others, there won't be any better political coverage out there (though I may flip to CNN and Fox News to see what they say as well).

I'd close by saying something like "It doesn't matter who you vote for, just make sure you vote" tomorrow if you are in Iowa (or, as I properly should say, "just make sure you caucus") but it does matter who you Caucus for. America will either change for the better tomorrow (an Obama win), or will simply be arming itself for the same fight it's been having since the 1980s (a Clinton win). Maybe Clinton can win that fight. Likely, she'll just be fighting it for her term in office. Obama, though, as Mike Huckabee said on the Tonight Show (praising Obama) he's a vertical politician. He transcends right, left, Republican, Democrat, and he can lift America up. Iowa voters just have to let him.

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Anonymous said...

Economist Dale Jorgensen, Harvard University, was commissioned to find out what portion of current prices were represented by costs for complying with the federal income tax code (i.e., embedded tax costs). He concluded that 22% (average) of every retail dollar, spent by consumers, constituted a price-embedded tax. Thus, in addition to individual income tax and FICA withholding, individuals are unwittingly paying these unseen, embedded business tax costs with every purchase of a new product, or service.

Under FairTax, prices would fall, due to removal of embedded business tax-related costs. Concurrently, wages may rise due to a mix of factors, including reversion of withheld pay (or some portion thereof) to employees, advancement opportunities due to business expansion resulting from retained earnings, and/or increased demand for labor accompanying increased competition (from that expansion). Where profits (or wages) appear lucrative, competition will move into the market space, driving out excesses (immediately present after FairTax is enacted), arriving at new "market-adjusted" prices.

For FairTax to constitute 23% of new transaction cost (i.e., "market-adjusted" price plus FairTax), a mark-up of 29.9% (tax exclusive rate) on the new "market-adjusted" price is necessary. (Before balking, consider what we're paying now if income tax rates are converted to tax-exclusive sales tax rates on net income instead of percentage of gross income. The following figures can be compared to the 29.9% FairTax mark-up: Fifteen pct bracket = 17.6%, twenty-five pct bracket = 33.3%, twenty-eight pct bracket = 38.9% (! really), and thirty-five pct bracket = 53.8% (! that's how bad it is).

In order to make FairTax a progressive consumption tax (such as that recently called for by Warren Buffett), all citizen-families are simply sent a monthly consumption [tax] allowance, called a "prebate." This prebate is intended to reimburse taxes on necessities for every citizen family without need for record-keeping or reporting. Moreover, the direct payment bypasses the creation of a tax code specifying exempted products and services around which a lobbyist industry could grow. The amount is variable, based on family size, and is equal to the FairTax rate on poverty-level spending, as defined by the Dept. of Commerce. At present, a family of one would receive ~$200/month, a family of four, ~$500/month. Thus, the "effective" FairTax rate paid by citizens, will *never* equal the full 23%. Of course, U.S. visitors (legal, and illegal) will pay the full FairTax when they purchase anything new, at retail (used are not taxed again). Under FairTax, working families will have their whole paychecks (minus any state or local income tax withholding) plus their monthly family prebate.

Additionally, citizens will no longer have to spend the average 50 hours per year preparing their federal tax returns. Having more monthly income may result in using credit less, and saving more. Larger savings will make it easier to purchase a home, at a lower interest rate and monthly payment. (Thus, mortgage deductions are no longer applicable when income is not the basis for taxation).

But is FairTax actually "fairer"? To provide substantive answers, Prof.'s Kotlikoff and Rapson (10/06) have concluded,

"...the FairTax imposes much lower average taxes on working-age households than does the current system. The FairTax broadens the tax base from what is now primarily a system of labor income taxation to a system that taxes, albeit indirectly, both labor income and existing wealth. By including existing wealth in the effective tax base, much of which is owned by rich and middle-class elderly households, the FairTax is able to tax labor income at a lower effective rate and, thereby, lower the average lifetime tax rates facing working-age Americans.

"Consider, as an example, a single household age 30 earning $50,000. The household’s average tax rate under the current system is 21.1 percent. It’s 13.5 percent under the FairTax. Since the FairTax would preserve the purchasing power of Social Security benefits and also provide a tax rebate, older low-income workers who will live primarily or exclusively on Social Security would be better off. As an example, the average remaining lifetime tax rate for an age 60 married couple with $20,000 of earnings falls from its current value of 7.2 percent to -11.0 percent under the FairTax. As another example, compare the current 24.0 percent remaining lifetime average tax rate of a married age 45 couple with $100,000 in earnings to the 14.7 percent rate that arises under the FairTax."

Further, per Jokischa and Kotlikoff (2005) ...

"...once one moves to generations postdating the baby boomers there are positive welfare gains for all income groups in each cohort. Under a 23 percent FairTax policy, the poorest members of the generation born in 1990 enjoy a 13.5 percent welfare gain. Their middle-class and rich contemporaries experience 5 and 2 percent welfare gains, respectively. The welfare gains are largest for future generations. Take the cohort born in 2030. The poorest members of this cohort enjoy a huge 26 percent improvement in their well-being. For middle class members of this birth group, there's a 12 percent welfare gain. And for the richest members of the group, the gain is 5 percent."

The current income-based tax system is also more expensive to run, because of the manner in which the tax code is gamed by politicians and lobbyists. Politicians realize great power, and attract constituencies for support, by granting tax favors (i.e., credits, deductions, exemptions) through lobbyists. Fully, fifty-three percent of Washington lobbyists are there because of the tax code! The tax code is continually changing, making it more complex - more difficult to understand. And, the salaries and costs of tax lawyers and lobbyists end up in higher prices of the products and services we buy. Additionally, the time and money required to keep records, file returns, report for audits, retain accounting and legal help, pay IRS penalties and interest, is time and money lost for other productive, or recreational, activities. Depriving us of the use of withheld wages increases our expenses through zero-interest withholding, inflation, return preparation time, and interest paid on credit cards and loans that otherwise may not have been necessary. Summed up, the cost of tax compliance, nationally, has been estimated to range anywhere from $265 billion to twice that amount, depending on the extent to which tax-avoidance consultation is sought and utilized. These expenses constitute a substantial hidden tax which is incomprehensible to the average working American. And the FairTax gets rid of all of it for most Americans, and most of it for business owners.

We, as FairTax advocates, believe that government should serve We, the People, with a fair tax system that will not enable politicians to pit poor against rich (creating barriers to achieve wealth, adding tax penalty to the sacrifices made for personal success). Nor do we want politicians to continue using business as a tool to hide taxes from consumers, often villifying business, which discourages entrepreneuship, personal achievement, economic growth. Liberty and happiness depends on restoring the fruits of labor to those who produce them. We believe that the tax function should align with economic growth, not against it, that government should be paid for in the same manner as working Americans - when, and because, something is sold!

As things stand at present, the system primarily benefits politicans who cater to special interests through lobbyists who game the tax code. The politician seeks to capture them as constituent voting blocks, dependent on continued syphoning of taxpayer dollars to their members' benefit. This is increasingly repugnant to the average working American who often finds it difficult to meet the needs of his, or her, own family in an environment where federal and state business income taxes substantially contribute to trade inequities resulting in the loss of American jobs! Thus, the Sovereign are continually degraded by features of Congress's income tax policy. The most rapidly-growing needs-based "special interest" group has become the Citizens! You see? Congress has nearly all the power; and We, the People, have become We, the Serfs, robbed and enslaved. Getting the federal government's hands out of our family paychecks is the single most important reason to replace the income tax with a consumption tax, the FairTax.

Many of us have joined in order to build a national movement to free ourselves, our family pocketbooks, and our businesses from confiscation of income, and punishment of productivity. And this we say to our federal representatives,

"Either scrap the code and enact the FairTax, or we intend on replacing you with someone who will."

(May reproduce in whole or part. - Ian)

todd brakke said...

"I know most Democrats relish the chance to take him on, thinking he'll be an easy foil in November, but I wouldn't be so quick to celebrate should he win."

I think the character Toby Ziegler said it best:
"There’s an old expression: 'Quando dio, ole castigarci ci manda, quello che desideriamo:' 'When the gods wish to punish us, they answer our prayers.'"


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