Is Huckabee's 'FairTax'plan a good idea?

Republican presidential contender Mike Huckabee has been rising in the polls in recent weeks, and has now assumed the front-runner status in Iowa. Much of his rise can be credited to his advocacy of the 'FairTax'. The FairTax is a plan to do away with the IRS and every other federal tax including Social Security, capital gains, and Medicare and replace them with a 23% national sales tax.

This proposal is drawing big crowds at Huckabee's campaign events and, along with his appeal to Evangelical Christians, is one of the driving forces behind Huckabee's campaign. The idea is very popular because of its simplicity and the fact that people would no longer have to deal with the IRS and filing annual tax returns every April. It is a very emotional issue for many Republican voters.

But is this FairTax plan really a good idea? The popularity of the idea is understandable. After all, who doesn't want to get rid of the IRS? Many people dread having to file their taxes and worrying about being audited, etc. The current tax code is so complicated that very few can understand it. Even most accountants and tax attorneys don't have a grasp of every aspect of the tax law. How can the average American understand it? Isn't it time to get rid of the whole thing?

Well, the idea definitely sounds attractive. At first glance, I have to admit that I also liked the concept of doing away with the IRS and simplifying the tax code. Also, this would encourage people in America to save more money, which is desperately needed in this country. Also, to ease the burden on the poor, Gov Huckabee proposes to send a monthly check to most Americans to cover the tax on basic needs like food and clothing.

As it was with the Huckabee candidacy itself, upon closer examination, this FairTax plan has alot of potential problems. First of all, with no IRS and a 23% tax on all goods and services, the creation of a black market would seem inevitable. In the service industry, it would be particularly easy to take cash payments and not charge the 23% tax.

The Huckabee campaign's response is that Gov Huckabee will address issues of compliance when he becomes president. My question is, why not address them now, while campaigning for president? Could it be that the solution is another intrusive government agency perhaps even worse than the IRS? Of course, he wouldn't want to discuss that now, because conservative Republicans wouldn't like that idea very much.

Another potential issue with the FairTax is that federal, state and local governments would have to pay an additional 23% on all of their services. On the federal level, that may cause a yearly deficit, increasing the need for revenue. The obvious next step would be for an increase in the percentage of sales tax, thus putting more pressure on governments and individuals.

For state and local governments, this will almost certainly mean higher taxes. We know that they will not reduce their spending, so there will be no other way to collect the revenue needed to pay the increased costs of goods and services.

Another possible unintended consequence of the FairTax could be an economic downturn. We know that consumer spending is a major driver of a strong economy. Maybe our savings rate would go up under the FairTax, but another result could be that Americans save to the point where they hardly spend money outside the basic necessities. If this were to happen, our economy could suffer, causing recession and the loss of many jobs.

I realize that these concerns over the FairTax are only possible outcomes if it is ever implemented. We know that things don't always turn out the way people predict and maybe the FairTax would end of having no major downsides. With all the aforementioned issues, I have a hard time imagining that this would not end up overall damaging to our economy and our country.

The question Republican voters must ask themselves is are we willing to risk our future on Gov. Huckabee and his very risky tax scheme?