Mitt Romney has been conspicuously close to the vest in regards to his beliefs and policy plans throughout his campaign for the Republican nomination. While I get the feeling he is hoping to win the nomination before coming out with proposals that might anger the Tea Party, nobody really seems to know, and everything seems like a guess.
Perhaps the best way to get an idea of Romney’s positions could be to look at those of his advisors. Romney employs Gregory Mankiw as his primary economic advisor. Mankiw, a Harvard economist and former chairman of the Council of Economic Advisers under President George W. Bush, is dare I say, a little more forthcoming in his beliefs.
Late last year, came out in favor of a consumption, or sales tax, as an alternative to the current federal income based system. A broad-based consumption tax would be levied on what Americans buy.
Mankiw acknowledged that the consumption tax model would mean a tax increase for middle and low income earners in his speech. “I think the more difficult question is the distributional effects,” he said.
However, he made no reference to other potential flaws in the model, such as, the ease in which Americans could spend their earnings overseas. After all, a sales tax would incentivize citizens to travel the world to spend their dollars tax free.
For instance, a consumption tax would likely mean an an instant and temporary boost to the economies of Tijuana, Mexico and Vancouver, British Columbia. It would mean great things for the travel and airline industry, as well as the fashion centers of Paris, France and Milan, Italy.
Just think: Instead of paying a relatively high income tax at home, Americans could enjoy the luxuries of travel and discounts abroad. Sure, he would emphasize a customs crackdown at the airports, but there is no way everything could be caught. And of course, money spent on services and hotels overseas would also likely go untraced.
I simply can’t see how this would work. Let’s just hope that Romney and Mankiw don’t see eye to eye on this issue. Any thoughts, Mitt?
Romney’s plan, as reviewed by the non-partisan Tax Policy Center, is shown to increase taxes for middle class families while providing deep cuts for the very wealthy.