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By MELANIE ASMAR
Monitor staff
December 10. 2007 12:05AM

Ask Mike Huckabee about his tax plan and he'll talk about pimps and prostitutes.

The Republican presidential candidate often says that one of the selling points of his plan to replace the federal income tax with a 23 percent sales tax is that it would force those who deal in cash to pay taxes.

"You end the underground economy," Huckabee said at a recent luncheon for the Greater Concord Chamber of Commerce. "Illegals, prostitutes, pimps, gamblers, drug dealers - everybody pays taxes."

In reality, his plan isn't that simple. Known as the Fair Tax among its backers, it's supported by many economists as more efficient than the current system. But even the economists, and the tax's staunchest supporters, admit that the Fair Tax is a political nonstarter. The chances that Congress would overhaul the entire tax code are slim to none, they say.

"This will not be enacted by Congress unless the American people rise up and demand it," said Ken Hoagland, the spokesman for FairTax.org. "Congress is not willing to give up its power."

The Fair Tax is arguably Huckabee's most radical proposal. On most issues, he holds standard Republican positions: He's for overturning Roe v. Wade, protecting Second Amendment rights and building fences on the U.S. border.

But his opponents have criticized his record on taxes. While governor of Arkansas, Huckabee raised taxes on gas and cigarettes to pay for schools and roads. His rivals have pounced on his mixed record - he cut some taxes, too - and analysts say the Fair Tax may be Huckabee's attempt to win back support.

Taxes are "one of those issues that helps with conservatives," said Wayne Lesperance, an associate professor of political science at New England College. "Huckabee doesn't have to do that with social issues . . . but where he has proven to be vulnerable is on fiscal matters. (The Fair Tax) could be seen as an effort to confirm or create his credentials as a fiscal conservative.

"It does set him apart."

Bob Clegg, a state senator and Huckabee backer, said if Huckabee were trying to court fiscal conservatives, he would stick by the current system. That's what most of his opponents have done, claiming the solution to the country's fiscal problems is to cut some taxes and abolish others.

"If (Huckabee) wanted to garner the favor of that (fiscal conservative) wing of Republican Party, he'd drop the Fair Tax and say the current system is not that good but it's the one we have," Clegg said.

Instead, Huckabee talks passionately about eliminating the income tax altogether.

"I'd like you to join me at the best 'Going Out Of Business' sale I can imagine - one held by the Internal Revenue Service," Huckabee says on his website. "When the Fair Tax becomes law, it will be like waving a magic wand releasing us from pain and unfairness."

The Fair Tax would levy a one-time 23 percent tax on all new goods and services. It's what economists call a consumption tax, a tax on what people buy instead of what they earn. Developed more than a decade ago by a group bent on coming up with the next great tax structure, the Fair Tax would wipe out income taxes of any kind.

It would also eliminate all tax deductions and exemptions. Proponents say that aspect is offset by a built-in "prebate," which would reimburse everyone, from Bill Gates to a $10-an-hour sales clerk, for the amount of tax they would pay on purchases up to the poverty level. Essentially, proponents say, necessities would be tax-free for the poorest Americans. And, they say, the richest Americans - the ones who buy $1 million yachts - would be hit hardest.

Huckabee touts the Fair Tax as a way to "transform our economy," a system that would "benefit everybody, from the top to the bottom of the economic spectrum." He says it would stop punishing productivity and start rewarding thrift. It would eliminate the headaches caused by the IRS, he says.

And, he says, it would move trillions of dollars stashed offshore back into the American economy.

"What would happen if that $10 trillion that's been moved offshore - legally, but moved offshore - was reinvested in the United States economy as working capital?" Huckabee said at the recent luncheon. "We'd see Daimler Chrysler headquartering here instead of in Europe. Halliburton might move back from Dubai where they moved to avoid our tax laws. It makes . . . sense."

But the Fair Tax has plenty of critics. Some economists say it wouldn't raise enough money. They call it regressive and say businesses and individuals would find loopholes.

William Ahern, spokesman for The Tax Foundation, a nonpartisan tax research group in Washington, D.C., said even Huckabee's claim about pimps and prostitutes isn't true.

"Say (a drug dealer) spends $100,000 on a tricked-out Hummer," Ahern said. "Instead of just paying the local car tax or sales tax, he would be paying, according to the Fair Tax, the full 23 percent (tax).

"But he won't be collecting the Fair Tax on his sale of drugs," Ahern added. "You and me, the two secret heroin addicts who are pouring our wages into the coffers of this drug dealer instead of making mortgage payments . . . we avoid paying the Fair Tax by buying heroin instead of taxable goods."

That's not to say Ahern is totally anti-Fair Tax. He, like many economists, thinks consumption taxes are a simpler way to raise money. When you tax income, questions arise about what's income and what's not, Ahern said. When you tax spending, "spending is spending," he said.

Still, Ahern said, it's unlikely the country will see any sort of consumption tax anytime soon. Political analysts agree. "As much as Americans complain about the income tax, it is something that's familiar," said Dante Scala, an associate professor of political science at the University of New Hampshire. "So sometimes, when faced with an unfamiliar new tax, voters tend to be somewhat risk-averse about it."

Clegg, the unofficial Fair Tax expert for Huckabee's New Hampshire campaign, said Huckabee thinks the tax will be politically viable if Americans want it to be. He said it may take two years to get the plan through Congress, and he said the final plan might not look exactly like Huckabee's proposal.

But, Clegg said, the American people are fed up and looking for a change.

Huckabee uses a local story to emphasize that point on the stump. In his usual folksy way, he tells the story of a man who works at a machine shop in Manchester. The man's daughter goes to graduate school at Cornell, Huckabee says, and the man took a second shift at the shop to pay the $54,000 tuition.

"Because he's working two shifts at the machine shop, he went into a new tax bracket," Huckabee said at the luncheon. "So much of what he's earning in the second shift is not going to help his daughter in Cornell. It's financing the government and their tax greed. So here's a guy who's working twice as hard but not getting twice as much money because the tax code is penalizing his productivity.

"If he really wanted the government's help, you know what he could do?" Huckabee said. "He could quit both jobs and then his daughter would qualify for some assistance. Now, is that nutty or what?"

That line got some applause at the luncheon, from an audience that included a couple dozen businessmen. But it's unclear whether his Fair Tax message will resonate with most voters.

Lesperance and Scala are skeptical. In New Hampshire, they said, people don't like new taxes.

"There are parts that could be appealing, (like) doing away with the IRS," Scala said. But "unless Huckabee does a very good job explaining it, it could become the subject of an attack from another opponent: 'Here's Mike Huckabee, who's got an exotic new tax that could cost you, when you buy a new car, X number of dollars.' That could turn off voters. especially in a state like New Hampshire."

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By MELANIE ASMAR

Monitor staff