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Jon Huntsman Endorses (Sort Of) The Toomey-Hensarling Tax Hikes

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Former Utah Governor Jon Huntsman was my guest just now on the program. He favors ending the mortgage interest deduction and the charitable deduction. We also talk about President Obama’s China policy. Transcript is below.

HH: Pleased to welcome back now Governor Jon Huntsman, former Governor of Utah, former Ambassador to China. Governor, great to have you back, thanks for joining us.

JH: Hugh, thanks for having me. Always a pleasure to be with you.

HH: I’d like to start with the Supercommittee debate, since so many of your colleagues on the presidential trail have commented on it. What do you think of the Toomey-Hensarling tax plan where a deduction cap would come down in exchange for lowering rates across the board, and revenues allegedly would rise?

JH: Well, let me just say about the Supercommittee, you know, let’s just admit that it is, to my mind, an admission of failure. The fact that we even have a Supercommittee that’s trying to work through this, these issues, not to mention the fact that $1.5 trillion dollars over ten years is way too low. I mean, I’ve embraced the Ryan plan. We need to be looking at more, $5-6 trillion dollars over ten years if we’re going to get spending down to a rate that is more sustainable. So the fact that we have a Supercommittee is an admission of failure. The fact that it’s focused on $1.5 trillion is way too low. Beyond that, you know, if you have to work out a pathway forward, my tax plan calls for phasing out loopholes, deductions, raising the revenue, reinvesting it into the tax code, lowering the rate, broadening the base, and leaving us a whole lot more competitive in the 21st Century. So there’s something to look at there. I’m not sure what all the details consist of, but in theory, something like that might work. [# More #]

HH: Do you favor limiting the home mortgage interest deduction, the charitable deduction, and the state and local tax deduction?

JH: I have to be honest, Hugh. I’m in favor of phasing them out. I was in favor when I was governor, and created a flat tax in my state. The only way we could raise enough money to lower the rate significantly, so that we could truly be in the competitive game, was to phase out the deductions in a meaningful way. We did that. We weren’t successful with all of them, and I’ve put forward a tax plan that the Wall Street Journal has endorsed, basically calling for the same thing, and that is wiping clean the loopholes and deductions on the individual income side, doing the same thing on the corporate side, corporate welfare and subsidies, because they distort, and let’s face it, we can’t afford them any longer as a country.

HH: What will that do, if you are successful, to the home values of the middle class, and to the charitable deduction-dependant organizations like hospitals, schools, churches, eleemosynary organizations across the country?

JH: We found as we were doing the analysis at the state level that it would not impact charitable giving. In fact, it would probably see it go up, because rates would go down, and people would feel that they had more to give. And there may even be some quantitative analysis done by others who were actually in a position to have it play out in the real world. So that is something that probably would be different in practice in the real world than people might imagine up front. With respect to the home mortgage interest deduction, you know, one of the problems here is that we are rewarding debt over equity, just to begin the conversation. And I’m not sure that’s the best thing for us to be doing, now that we’re all trying to deleverage anyway. Second of all, and I’ve had this conversation with the home mortgage folks, tell me you wouldn’t be willing to make a trade-off of lower rates over all in exchange for giving up the deduction. And the response was basically if you treat everyone as you would treat us, which is to say that you would sweep clean the deductions and the loopholes, our people would probably be all right with that.

HH: All right, that’s news to me, but I want you to state your position, not debate it with you. I’m glad to have the candor, Governor. Now I want to switch to China, because obviously you’ve got credentials here that very few people do. How has the President’s policy towards China worked or not worked in your view?

JH: Well, any relationship with China has to start with the assumption that you have a strong core at home. That’s where he’s fundamentally failed us on the most monumental of counts. We are weak at home, we have no leverage because our economy is broken. And when you have no leverage at home, you’re not respected at the negotiating table in Beijing. So to start the discussion, the fact that we’ve failed in revitalizing our economy at home means that we are failing in the U.S.-China relationship. Second, I think there has been an inadequate push in terms of the values that really matter in China. I used to do it a lot as ambassador. I know that that probably rubs some people the wrong way. I had to pay a price for it in terms of not being able to get out to provinces I had hoped to visit, because I was sanctioned by the government there, and that is meeting with dissidents. That is going to church services of various kinds, and promoting religious tolerance, and human rights and internet freedom, all of the things that are going to make the U.S.-China relationship stable and successful longer term. Listen, there’s enough that divides us already in the U.S.-China relationship. We’re merely a transactional relationship, and have been for forty years now. In order for us to make us successful in the years to come, we must infuse a few shared values into a relationship that is only shared interest at this point, and that would be human rights, and that would be religious tolerance, and that would be political reform, and that would be the role of the internet in society, things like that.

HH: Do you believe that we are less respected by China now than when President Obama took office? And if so, why?

JH: We are less respected, I believe, because of where our economy is going. They respect economic might, because with economic might flows our ability to influence events in the world, because we have a strong core. And with a strong core, you’re also able to radiate your values of liberty, democracy, human rights and free markets. We’re less able to do that today.

HH: Are you concerned about the investment the PRC is making in their navy, specifically their submarine and their anti-ship capabilities, as well as the People’s Republic Army?

JH: It’s something that we have to watch very, very closely. So if you stop to consider that they’re spending about $90 billion bucks a year on their military versus, you know, $650 billion or so that we are spending, inclusive of Afghanistan, and where most of it is going is to their maritime capabilities, which you’re absolutely right. The submarine and their missile program is getting a good bulk of it as well. It is so lacking in transparency, in terms of our ability to understand where that money is going, or what it means in terms of systems that they’re developing. We’ve got to know more about it, and we have to have more eyes on their capabilities, their developmental capacity, and what it means to the region specifically when you’ve got issues like the Spratly’s and the Paracels in the South China Sea that in future years are going to be real hot spots when you’ve got four or five claimants in the region who take that region very, very seriously. But here’s something, Hugh, that people need to remember as well. A very telling statistic about Chinese spending is the fact that they are spending more on domestic security, which is their ministry of state security and the ministry of public security than they are on their ministry of defense, which tells you simply that they fear their people internally more than they do externally, which should put in perspective where they see their risk coming from.

HH: Governor, we’re out of time. It’s always a pleasure, Governor. Thanks for spending time with us. We’ll be watching next week at the foreign affairs debate at AEI and Heritage.

End of interview.

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