Jan. 24 Republican debate transcript

McCain: Governor Huckabee, you have been one of the strongest and most persuasive proponents of the so-called fair tax. And it is, I must tell you, every town hall meeting I have, there's somebody that shows up with a T-shirt on, and there's enormous groundswell for it.

How do you answer the criticism that a flat-out just sales tax wouldn't cause lower-income Americans more of the pain and the burden of running our government and paying for its operations? How do you respond to that particular criticism of it? And also, how do you account for the resonance that this proposal has gotten throughout the nation?

Huckabee: Well, the reason that it's getting resonance is because people would love to see the IRS abolished. They know, as Dr. Phil might say, we've had it since 1913; how is that working out for us? It's not working out so well.

The fact is, we're penalized for productivity in this country. The harder you work, the more you earn, the more the IRS and the government wants from you. What the fair tax does is says we want you to earn, we want you to save, and we want you to buy things and sell things and make a profit.

Republicans ought to embrace the fair tax, as should Democrats, because it stops this nonsense and goes to the common sense, the idea that we should encourage people to work and to get something for it.

On the bottom end of the spectrum -- here's the thing -- a lot of people have never read the entire fair tax. Because when I first heard about the fair tax, a consumption tax, quite frankly, it sounds like it would be oppressive and regressive to the poor. The poor come out best of all because of the provision in the fair tax called the prebate, in which every American each month is given the amount of the fair tax back up to the level of poverty.

Everybody gets it; not just those under the level of poverty. It actually untaxes the poor, untaxes the elderly. It makes sure that we don't end up paying taxes on groceries and medicine and the basic necessities of life.

And for each third of the economy, there's a benefit. About a 14 percent benefit for those at the bottom. Those in the middle, about 7 percent. Even those at the very top end of the economy end up with about a 5 percent benefit.

Everybody gets in the economy. No more underground economy. Drug dealers, prostitutes, pimps, gamblers -- non-Republicans -- all of those people out there... will be paying taxes. Nobody is working under the table.

And so you have now a broad base in which you're receiving the money, and it's a completely different, transparent tax system, as opposed to the one now, where about 22 percent of our products we buy -- the tax is hidden into it. Corporations don't pay tax. They build that cost in, pass it onto the consumer.

Williams: Time.

Huckabee: And what's killing the American economy is that embedded tax and the invisibility of the tax.

That's why I support the fair tax. I want to put the IRS out of business.

Russert: Governor, there's a real issue of enforceability -- I want to ask a follow-up. The Citizens for Tax Justice say that 93 percent of Americans, in effect, pay less than 15 percent tax right now. You're imposing a 30 percent sales tax. How does that help the 93 percent of Americans who are paying 15 percent or less right now?

Huckabee: Well, first of all, Tim, it's 23 percent if we were to break even. And they're not paying 15 percent. That's in their visible tax in the terms of the takeout from their checks.

When you include the built-in tax, the embedded tax in the products we buy, that corporations build in, the average American is paying 33 percent in his or her taxes. The average American is working through the month of May just to pay off the government.

It would be a dramatic difference if the taxpayers got to choose the taxes, which they would do under the fair tax.

I think most of us realize that there's got to be a better system.

The one we have now is irreparably broken. It's chased jobs. Now we have $12 trillion of working capital moved offshore. It's because our tax system has chased it away.