Rep. John Boozman’s campaign for the U.S. Senate rests on three giant advantages. He is not Blanche Lincoln. He is a Republican in a year when people everywhere have shifted blame for the nation’s ills from George W. Bush and 10 years of Republican domination of Congress to the Democrats. Third, hardly anyone outside his home district, and not too many there, has a clue about what he stands for.
The third is Boozman’s most redeeming grace, but the only one of the advantages that he conceivably could lose by election day. Sen. Lincoln cannot change her party or do much about her own record except to emphasize the better things she has done for the working people of Arkansas and talk less about her deeds for the rich and privileged interests.
This week, Lincoln made a good stab at illuminating Boozman’s philosophy, if it can be called that, and at giving people a peek at what he might do if he is their senator. She observed that he was a sponsor of the so-called Fair Tax, the plan to shift a huge part of the tax burden in the United States from corporations and the rich to the middle class. It would eliminate corporate and individual income taxes, taxes on rich inheritances, payroll taxes and self-employment taxes and replace them with a 30 percent national sales tax on every commodity or service that anyone buys. The 30 percent tax rate is a conservative estimate because it assumes that the tax would not create a massive black market or cause tax evasion on a giant scale. If those things happened, the tax rate would have to be adjusted upward until it produced the same amount of federal revenues that all the abolished taxes now produce.
The sponsors like to promote one small part of the plan. People would get a small regular check from Uncle Sam representing the amount of sales taxes that a person living at the poverty level would need to pay on their basic living expenses.
The sweetly named Fair Tax has been around for two decades, but those who have yearned to slip corporate taxes and progressive tax rates on the wealthy have only been able to land a few backers in Congress, even among conservative Republicans. John Boozman, however, signed on.
But when Lincoln raised the issue this week and said it showed whom Boozman would represent if he goes to the Senate, the congressman said he was merely a sponsor of the bill. He said he would not necessarily actually vote to do those things.
The implication is that he sponsored the bill in the House of Representatives merely to please the interests pushing the sweeping overhaul of taxes — sort of like Lincoln when she once signed on as a sponsor of the bill to improve employees’ chances of having a union bargain for them. But Boozman also implied that he might vote for his bill if it should ever reach a vote in the Senate. We are just left to guess.
His own voting record offers a clue to what he would do. He has voted for every proposal in the House of Representatives since 2001 to lower taxes on corporations and high personal incomes and inheritances and against every proposal to close tax loopholes for corporations that seek to escape their share of taxes through offshore tax havens or other devices. That went over big in his native Washington and Benton counties, home of some of the nation’s richest companies and owners. Lincoln voted the same way for a couple of years, although by 2004, she had come to her senses after seeing the burgeoning deficits and debt caused by the tax favors and large spending commitments of President Bush and the Republican Congress. She can claim only a modest amount of virtue, which is hard to sell in a political campaign.
But the Fair Tax is about as telling an issue as you can find. Lincoln’s problem is that she seems only superficially knowledgeable about what the thing would do to the people of Arkansas and thus she is incapable of exploiting it like she should.
For example, she repeated the sponsors’ description of it as a “23 percent sales tax.” Twenty-three percent sounds pretty horrible, but the creators of the scheme fashioned a way to make the tax rate look as low as they could. If you looked at the national sales tax in the same way everyone in the country knows the sales tax, it would be a minimum of 30 percent.
It is tricky and the authors — maybe Boozman, too, but we can’t say for sure — count on its being too baffling for voters to understand.
The sales tax that the states would be expected to collect and remit to Washington would be 23 percent of the final price of a good or service: your groceries, your new car and your dentist and doctor bills. That is where the 23 percent comes in. But a sales tax is calculated in a different way. If an item costs $100 in Arkansas, the buyer pays $6 extra on that $100 item for a final price of $106. Using the Fair Tax prescription, the current Arkansas sales tax would be a tax of only 5.6 percent since the $6 of taxes is 5.6 percent of $106.
To produce the equivalent revenue of the other federal taxes, the national sales tax rate would have to be 30 percent, although the tax would be only 23 percent of the after-tax price of the product.
A hidden tax of that magnitude would produce such enormous distortions that we would have an unstoppable underground economy of black-market sales and services. So the tax rate would have to be adjusted upward to meet current and future levels of expenditures for everything from war to Social Security and Medicare. It would be up to the state government to enforce and collect the tax. No state government wants that burden. The state Revenue Department would need an army of auditors and agents and they still couldn’t enforce it.
But all of that is a small price to pay for BP, Gold-man Sachs, Citibank, Walmart and all the rest to keep and distribute their profits tax-free from now on. They say that is the future. We’ll be helping insure it in November.
