Americans for Tax Reform

On Taxes – In Their Own Words
Fourth Republican Debate
August 5, 2007
Drake University
ABC

STEPHANOPOULOS: Now, again, I also know that, Congressman Paul and Congressman Hunter and Senator Brownback and Senator McCain, you all voted against expansion, as well. So the only two gentlemen left here are Governor Romney and Mayor Giuliani. Are either one of you for the expansion of children’s health insurance, as outlined by Senator Grassley?

ROMNEY: We have to have our citizens insured, and we’re not going to do that by tax exemptions, because the people that don’t have insurance aren’t paying taxes. What you have to do is what we did in Massachusetts. Is it perfect? No. But we say, let’s rely on personal responsibility, help people buy their own private insurance, get our citizens insured, not with a government takeover, not with new taxes needed, but instead with a free-market based system that gets all of our citizens in the system. No more free rides. It works.

GIULIANI: The bill had two very unfortunate parts to it. One, it would reduce Medicaid Advantage, which is a very, very successful program that actually does bring about some form of a free- market solution. And second, it would have the really odd effect of moving children who presently have private insurance to becoming wards of the state, basically having them move in the direction of -- and I know the Democrats get all upset when you say this, but they’re taking us toward socialized medicine. If we want the kind of results they have in England or France or Canada or Cuba, like Michael Moore wants us to do, then we should go in that direction. But that would be a terrible thing to do. What we should do is increase the number of people who have private insurance. In order to do that, we should give them a major tax deduction, $15,000, let them have a health savings account as part of that. They’ll have an incentive to own their own health insurance. That’s the thing that’s wrong with the market here. It is not really good to move this thing in terms of more government control of health care.

YEPSEN: Governor Huckabee, is it time we raise the federal gas tax to start fixing up our nation’s bridges and roads?

HUCKABEE: Well, I think the obvious answer is, it’s not necessarily that we raise a tax to fix what we ought to fix of this country. We’re spending billions of dollars all over our country and around the world, but it may be time that we start spending some of those billions of dollars to deal with our own infrastructure. And the bridge isn’t the only problem. Anybody who’s flown lately -- as I do pretty regularly in the commercial system -- know that we have a complete gridlock.

YEPSEN: Mayor Giuliani, how do you answer -- in Minnesota, Governor Pawlenty, who vetoed an increase in his state gas tax said now he may consider one. Is this Republican dogma against taxes now precluding the ability of you and your party to come up with the revenues that the country needs to fix its bridges?

GIULIANI: David, there’s an assumption in your question that is not necessarily correct, sort of the Democratic, liberal assumption: “I need money; I raise taxes.”

YEPSEN: Then what are you going to cut, sir?

GIULIANI: But wait, wait, wait. Let me explain it.

YEPSEN: What do you cut?

GIULIANI: The way to do it sometimes is to reduce taxes and raise more money. For example...
(APPLAUSE) ... I ran the city -- I ran a city with 759 bridges; probably the most used bridges in the nation, some of the most used in the world. I was able to acquire more money to fund capital programs. I reduced the number of poor bridges from 5 percent to 1.7 percent. I was able to raise more money to fix those bridges by lowering taxes. I lowered income taxes by 25 percent. I was collecting 40 percent more from the lower income tax than from the higher income tax. Or, I’ll give you another example. Senator Edwards last week recommended increasing the capital gains tax from 15 percent to 28 percent because he wants more money.

GIULIANI: Now, Senator Edwards hasn’t had much executive experience because the reality is the last time -- the last time we raised the capital gains tax, and you can go back and check it, from 20 to 28 percent, we lost $45 billion. There is a liberal Democratic assumption that if you raise taxes, you raise money. We should put more money into infrastructure. We should have a good program for doing it. But the kneejerk liberal Democratic reaction -- raise taxes to get money -- very often is a very big mistake.

STEPHANOPOULOS: Governor Romney, do you want to cut taxes to fix more bridges?

ROMNEY: There’s no question but that the biggest source of revenue for this country -- if you really want to make some money in this country, really get some money so we can repair our infrastructure and build for the future, the biggest source of that is a growing American economy. If the economy is growing slowly, when tax revenues hardly move at all, and, boy, you better raise taxes to get more money for all the things you want to do. But if the economy is growing quickly, then we generate all sorts of new revenue. And the best way to keep the economy rolling is to keep our taxes down. That is why I proposed that middle-income Americans ought to pay no taxes on their savings. Invest in the future of the economy. Growth helps us provide the revenue that we need. Our bridges -- let me tell you what we did in our state. We found that we had 500 bridges, roughly, that were deemed structurally deficient. And so we changed how we focused our money. Instead of spending it to build new projects -- the bridge to nowhere, new trophies for congressmen -- we instead said, “Fix it first.” We have to reorient how we spend our money.

YEPSEN: Governor Huckabee, this issue of tax policy, I see it as a real fault line inside your party -- fair tax, national sales tax, a flat tax, or make adjustments to the existing tax system.

YEPSEN: Where do you come down on this question?

HUCKABEE: I absolutely support the fair tax. And part of the reason is, the current system is one that penalizes productivity. A recent poll showed that more Americans fear an audit of the IRS than they do getting mugged. And the reason is, getting mugged isn’t as painless as an audit from the IRS.
(LAUGHTER) And the reality is, if we could have the fair tax, you take $10 trillion parked offshore, bring it home, you rebuild the “made in America” brand, you free up people to earn money, to work, you don’t penalize them for taking a second job, you don’t penalize them for investing, you don’t penalize them for savings. Today, our tax system doesn’t need a tap of the hammer, a twist of the screwdriver, it needs a complete overhaul. And what the fair tax does, it ends the underground economy. No more illegals...

YEPSEN: Governor Romney?

HUCKABEE: Let me, if I may. No more illegals, no more gamblers, prostitutes, pimps and dope dealers will be able to escape the tax code.

YEPSEN: Governor Romney?

HUCKABEE: It’s the single great thing that will help this country (inaudible) revitalized economy.

ROMNEY: There are a lot of features that are very attractive about a fair tax. Getting rid of the IRS is something we’d all love. But the truth is, we’re going to have to pay taxes. We are the largest economy in the world. We’ve added -- during the time Europe added 3 million jobs, we’ve added about 50 million jobs in this country. And so completely throwing out our tax system and coming up with an entirely new one is something we have to do very, very carefully. The president’s commission on taxation -- tax reform -- looked at this and said: Not a good idea. Some of the reasons are the fair tax, for instance, charges a 23 percent tax, plus state sales tax, on a new home, when you purchase a new home. But if you buy an old home, there’s no tax. Think what that might do to the construction industry. We need to thoroughly take it apart before we make a change of that nature. That’s why my view is, get rid of the tax on savings and let middle-income people save their money tax-free.

YEPSEN: Mayor Giuliani, which one of the three options would you...

(APPLAUSE) A national sales tax...

GIULIANI: Eliminate the death tax.

ROMNEY (?): Of course. Of course.

GIULIANI: And that should be eliminated immediately. It makes no sense at all. In 2010, the death tax is going to go to zero percent. And then it’s going to go to 55 percent in 2011. You do not want to be on a respirator in 2010.

GIULIANI: And then I would say the most -- the most sensible thing to do is to simplify the tax code, reduce taxes, keep taxes low. I don’t think -- I think the flat tax and the fair tax are both very intriguing. And if we were starting off at the very beginning with taxation, the first argument I would make is let’s not have any taxes. The second argument I would make is the fair tax or the flat tax would probably be a better way to go.

STEPHANOPOULOS: But you’re not for the fair tax now, correct?

GIULIANI: It would be too complex to get there. And somebody would have to show me how we’re going to make that transition. And, also, the thought that there wouldn’t be an IRS with the fair tax -- well, who is going to administer the sales tax? And who’s going to administer the people that are exempt from the sales tax? And who is going to administer what items might be exempt from the sales -- maybe food would be exempt from the sales tax.

YEPSEN: Senator McCain, how do you come down on this question?

MCCAIN:: I believe that we’ve got to simplify the tax code. But one of the first areas we’ve got to go after is the alternate minimum tax, which is going to eat in to 20 million American families if we don’t eliminate it, and very quickly. Look, when we found out that Congress could not close a single military base when we had a huge number of them, we appointed -- we passed a law where we appointed a commission and they said we would close so many based and Congress votes up or no -- up or down. I would find Alan Greenspan. I’d say, “Give us your recommendations.” We’ll pass a law. And we will vote on Alan Greenspan and his commission’s recommendations, yes or no, up or down. That’s the way you’re going to simplify the tax code, which now requires $140 billion of American families’ income to prepare their tax returns.

TANCREDO: The reason why we absolutely need to go to something like a fair tax-- and I am a co-sponsor. And by the way, if you don’t understand how it would work, I would suggest to you that you read Neil Boortz’s book and John Linder’s. It’s a perfect explanation of how it works.

GIULIANI (?): (inaudible) read it -- underlined it.

TANCREDO: Here’s -- well, then you should know how it works.

GIULIANI (?): We just disagree about it. (LAUGHTER)

TANCREDO: The fact is that -- but the most important reason, the most important reason to move from an income tax to something like a fair tax -- to specifically a fair tax, is because an income tax is designed to manipulate behavior. BROWNBACK (?): George?
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TANCREDO: It gives the government the power to manipulate your behavior. “I reward you for the things I want you to do by giving you a tax cut. I penalize you for the things I don’t want you to do by raising your taxes.” That is too much power for the federal government. It is always going to be an overreach of power.

STEPHANOPOULOS: I’ve got to move on. Senator Brownback, you get 30 seconds on this, and then we move on.

BROWNBACK:I think we need to move toward an optional flat tax. I think we need to go to flat taxes.
(APPLAUSE) And let me just say why here. We’ve got a problem with the current tax code and we’ve tried to take it out. And every time you try to take it out, everybody comes to defend it that has something in it. You can put an optional flat tax in the tax code and let people choose. And it will create economic growth. That’s why 16 countries have already gone to a flat tax: It creates growth. Growth is the key for us in this economy for us to get things moving forward.