A Tale of Two Races… and Three RINOs

I want to talk about the race for the 8th Congressional District of Texas. But to make my point, I need to make a comparison.

There is an interesting contrast brewing between two congressional races in Texas, where RINOs (Republicans in Name Only) are running in solidly conservative congressional districts. Texas CD-2 and CD-8 are adjacent districts in an area that is considered to be one of the most conservative areas in the state. But each race presents entirely different challenges that conservatives need to address in different ways.

Texas CD-2

In CD-2, there is only one RINO in the race and three conservatives. The RINO is the incumbent, Dan Crenshaw (often referred to as Dan McCainshaw, since like John McCain, he is a vet, who ran as a Republican and became an Establishment RINO). There are also three excellent and principled conservatives in the CD-2 race. They are, in alphabetic order, Jameson Ellis, Martin Etwop, and Milam Langella. I have personally met with all three of the conservatives and I can confirm that I would be proud to have any of them represent me in Congress. In fact, this is the first time in my long life that I have been unable to endorse just one conservative candidate. They are each very different, but very capable and committed conservatives. I also believe that any of the three would be able to defeat the RINO incumbent, Crenshaw, in a runoff.

The challenge for the conservatives in this race is to simply overcome the “incumbent advantage.” By that, I mean that many voters (even Republicans) are lazy and rather than do their homework, just tend to vote for their party’s incumbent, when there is one, unless they are made aware that the incumbent has not properly represented them. So in the CD-2 race, all that is required to insure that a conservative wins this race, is to make as many conservative voters as possible aware of two things. First, they need to be made aware of Crenshaw’s very poor voting record (Red Flag Laws, Mandates, etc.). Second is to make as many voters as possible aware of how Crenshaw treats constituents (including teenage girls), who dare ask him embarrassing questions.

Since Crenshaw is an incumbent, there will almost certainly be a runoff, since 1) Crenshaw has the incumbent advantage, 2) Crenshaw is widely despised by conservatives in District, and 3) There are three solid conservatives in the race.

Look at the ideological make-up of the race. With three conservatives and one RINO in the race, the worst case scenario is a runoff that will include at least one conservative. Then consider that Crenshaw is widely enough disliked that, he will not be able to win, in a one-on-one race with any one of the three conservatives in the race. This is especially so, when you consider that any time an incumbent is forced into a primary runoff situation, the voters at large, tend to wake up and wonder why an incumbent couldn’t win the primary without a runoff. When they stop to examine Crenshaw’s voting record, the conservative will win in a walk.

So, in CD-2, the strategy for conservative voters is simple.

Vote A-B-C (Anybody But Crenshaw)!

Texas CD-8

Adjacent to CD-2 is CD-8, where Kevin Brady is retiring, the situation is not as simple.

As might be expected, in any district with an open seat, there were a host of announced candidates. There are still nine in the race, as this is being written. But what makes the CD-8 race particularly challenging for conservatives is that there are not one, but two well funded Establishment RINOs in the race and seven conservatives, only one of which has raised enough to present a challenge to the RINOs. So consider the ramifications.

With three well funded candidates in a race, involving nine candidates, there will most certainly be a runoff. That’s a given. So the challenge for conservatives is to make sure that it’s not a runoff between two RINOs. Let me be clear.

At least ONE of the seven conservatives MUST receive enough votes to overcome at least ONE of the RINOs, if conservatives are to have a horse in the runoff race!

Read that last statement again. This is critical!

That means that conservatives of CD-8 absolutely MUST coalesce behind just ONE of the conservatives in the race. It can’t be about personalities, who goes to your church, who your brother-in-law went to school with, or who you’ve known since he was 4-years old. It’s about focusing enough conservative votes on just ONE of seven conservatives, in order to allow that ONE conservative to defeat at least ONE of the TWO Establishment RINOs, so conservatives can be represented in the runoff.

If we don’t have a conservative in the runoff, the voters of CD-8 lose in the runoff and in the general election.

That said, former JAG officer, Jonathan Hullihan, is the only conservative candidate who managed to raise enough money to qualify for the CD-8 Debate that was held on February 7. For the reporting period ending on December 31, Jonathan had raised about $180,000. That’s more than 2.5 times the amount reported by EVERY other conservative candidate combined, in the same reporting period.

No other conservative stands a chance of making the CD-8 runoff.

Fortunately, Hullihan is definitely the most qualified candidate in the race. He is qualified as an unabashed conservative. He is qualified as being a tenacious advocate when he knows he is right. He is qualified in that he has the debating skills he developed as a JAG officer, to push a conservative agenda through a House full of political animals. He is qualified as a “strategic” thinker, who will always consider the ultimate goal and not allow himself to be side-tracked by minutia. He is qualified as a professional, who when he was a JAG officer, had to deal with congressional committees and the White House. But Jonathan Hullihan is alone, among all of the candidates, both conservative and RINO, in presenting himself with the professional demeanor of a congressman.

Watch the debate!

There is no doubt that Jonathan Hullihan won that debate, hands down. In fact, it appears that even the two Establishment candidates must agree. If you go to Jonathan’s Facebook page, pinned to the top of the page is a video of that debate. He knows he was the stand-out candidate in that debate and wants voters to watch it. On the other hand, Luttrell has only a video of his introductory statement on his Facebook page and Collins has only some photos of the debate. Neither of them provide a link to the debate anywhere that I can find.

Think about it. If you were running for office and thought you did well in a debate, wouldn’t you want voters to watch it. Since neither one of the Establishment candidates has provided a link to the debate, I have to assume that they both know how poorly they did in the debate and neither of them want you watching it. So let me repeat,

Watch the debate!

Based only on his demeanor, Hullihan would easily defeat the Kid (Collins) or the Bartender (Luttrell), in a runoff. But add in his stance on the issues and his solutions, and Hullihan would blow either of the RINOs out of the water.

Hullihan’s endorsements includes founding member of the Freedom Caucus, Rep. Dr. Paul Gosar, 2022 Candidate for Governor of Texas, conservative commentator, and host of Blaze TV, Chad Prather, Katy Christian Magazine, local GOP activist, Dr. Steven Hotze, withdrawn candidate for this seat, Ryan Jarchow, and conservative author, John Gaver (that’s me, by the way). This guy is the real deal.

Conservatives in CD-8 absolutely MUST decide if they want to give the runoff to two RINOs, by voting for one of the also-ran conservatives or do they want to focus all of the massive CD-8 conservative vote on the only conservative who can make the runoff, to insure that we still have a horse in the runoff race, after March 1st.

Let me repeat. This is too critical to allow yourself to waste your vote on a candidate that you consider to be marginally “the most conservative,” “the most Christian,” “the most pro gun,” “the most pro Trump,” “the most pro-wall,” “the most anti-mandate,” or the most pro or anti anything. Fortunately, Hullihan is the “most” in every one of those categories and more.

I can assure you that, after personally meeting and talking with Hullihan, Luttrell, Collins, Mitchell, and McKaughn, any one of the three conservatives I spoke with would be far better than either Luttrell (the Bouncer) or Collins (the Kid). I would be proud to vote for any one of those conservatives, in the general election. They are all great people and if there was only one Establishment RINO in the race, as there is in CD-2, I would recommend voting for any conservative. But in CD-8, we don’t have that luxury. We have TWO Establishment RINOs in the race, and both are better funded by the Establishment than any of the conservative candidates. That means that CD-8 conservative voters must focus our efforts on ONE and only ONE candidate.

Jonathan Hullihan is the ONLY conservative in the race who has the finances, the organization, and the popularity to make it into the runoff.

I proudly endorse Jonathan Hullihan for Congress in Texas Cd-8.

I urge all conservatives in Texas CD-8 to vote for Jonathan Hullihan in the GOP primary. Any vote for any other conservative is a vote for RINO representation of CD-8.

Follow us on social media

Tax Volatility: Which Tax Plans are Best and Worst?

One of the key economic issues that should be considered, when establishing tax policy, is “Tax Volatility.” This is a measure of how much tax revenue can be expected to rise and fall, with changes in economic conditions. Tax Volatility is defined as the standard deviation of the annual percent change in revenues over a period of years (usually 10 or more years).

In short, a tax that produces the same level of revenue for the government from year to year, despite changing economic conditions, would be said to have no volatility. By contrast, a tax that produces far less revenue during times of poor economic conditions, than in times of prosperity, is considered to be very volatile.

All taxes tend to fall into one of only a handful of categories. They are as follows:

  • Income Tax
    • Personal Income Tax
    • Corporate Income Tax
  • Sales Tax
  • Property Tax
  • Sin Tax
  • Severance Tax
  • Value Added Tax (VAT)

Of those taxes, virtually all economists of any stature agree that the Severance Tax, which is a tax on natural resource extraction, is by far the most volatile, While Property Taxes are by far the least volatile.

But these are just differences in volatility and this is not meant to suggest that we should do away with Severance Taxes nor should we rely more heavily on Property Taxes. But they are things that need to be considered, when establishing tax policy. I only mention them first, because it would be difficult to find any economist who would disagree with the above statement.

The second most volatile tax is generally agreed to be the Corporate Income Tax, followed by the Personal Income Tax. This statement is also widely accepted by most economists. There are some detractors, who would disagree. But they are few and all are associated with either the Washington, DC political establishment or a lobbying organization. I invite you to peruse articles from non-partisan economic analysis organizations like The Tax Foundation or The Pew Charitable Trust. You will find that Corporate Income Taxes are widely considered to be extremely volatile, followed by Personal Income Taxes.

Sin Taxes are not widely used as a major source of revenue, so it’s difficult to calculate their volatility. But if Nevada is any measure, Sin Taxes probably rank rather high up the volatility scale. The problem with Sin Taxes is that their volatility is not easy to predict. For example, with the exception of those few people who are truly gambling addicted, a person who has less disposable income will be less likely to gamble. But someone who has lost his job may be more likely to drink and smoke. However, since sin taxes are not a major revenue source, either in the states or at the national level, we can pretty much eliminate them from this conversation. I just wanted to mention them, so nobody would think I forgot them.

Sales Taxes are somewhat more volatile than Property Taxes, but much less volatile than any form of income tax (corporate or personal).

A VAT is touted as a consumption tax, but it is most assuredly not a “sales tax”. Since it’s collected at every point that value is added, along the way from raw materials to finished product, it has many things in common with both a sales tax and a corporate income tax. In fact, these similarities can be so confusing that,  during his 2016 presidential campaign, Ted Cruz even claimed that his VAT was a flat income tax, despite every major business and economics publication pointing out that it was a VAT. But, this blending of features means that, based upon its exact features, its volatility comes in somewhere between a corporate income tax and a sales tax.

Let’s take a look at each of these forms of tax and think about why they exhibit different levels of volatility. We also need to look at who pays each tax and what that tax means to the taxpayer.

Although we are looking at federal tax policy, looking at the history of taxation across the various states that have tried different approaches to taxation, will give us a window into what tax policy works best, for revenue stability.

Property Tax (paid by the individual):
Keep in mind that Property Taxes are collected only at the state level. We address them here, simply as a matter of comparison.

The Property Tax is by far the most stable form of tax. This is because taxing authorities tend not to lower property values, during times of recession. So, if the property value remains the same, the property tax will remain the same. This would appear, at first glance, to be an ideal tax for dealing with tax volatility, except for one very important issue.

A tax on property effectively means that the taxpayer doesn’t really OWN his property. That annual property tax is effectively a lease from the government. Think about it… If the taxpayer doesn’t pay that annual “lease,” the government will take back that property. That’s right. As long as property is taxed, it means that the government is granting you the right to use their property, for as long as you make that lease payment.

So, although a Property Tax is by far the most stable revenue producing tax, it should not really be considered a “tax,” but rather a “lease payment.” Therefore, besides being only a state tax, this factor should remove Property Taxes from consideration as a source of government revenue, at any level of government.

Severance Tax (paid by the individual):
Keep in mind that Severance Taxes are collected only at the state level. We address them here, simply as a matter of comparison.

States that rely heavily on Severance Taxes tend to see wild swings in tax revenue. This is because of the tremendous volatility of the base of this tax. It’s not so much related to the economy, in general, but rather to the price of oil. When oil prices are high, those revenues soar. But when oil prices drop, no new wells are drilled and the flow from existing wells may be reduced to the minimum required to keep them open. So government entities that rely on Severance Taxes see dramatic swings in their tax revenue from those sources of revenue.

According to data from the Pew Charitable Trust (see table), the highest tax volatility over the last ten years occurred in Alaska, North Dakota, and Wyoming.

Severance Tax Volatility of Selected States
State Alaska North Dakota Texas Wyoming
Overall Volatility 36.9% 16.4% 6.1% 13.3%
Severance Tax Volatility 47.0% 32.9% 39.5% 31.6%
Severance Tax % of Revenue 62.3% 45.7% 7.5% 35.6%

As you can see from the above table, all three of those states rely very heavily on Severance Taxes. But Texas, which is the largest oil producer in the USA, had an overall tax volatility of a mere 6.1%. That’s because, although the Texas Severance Tax Volatility was in the middle of the range of all four states, Severance Taxes made up only 7.5% of the overall Texas tax revenue.

Although the corporations that remove the resource from the ground are the ones who directly remit those state Severance Taxes, the corporations are only a conduit. It is the final consumer, who ultimately pays all Severance Taxes that are passed on by the corporations, in the form of higher prices for gasoline, oil, and plastics, among other things.

Certainly, there may a place for Severance Taxes, at the state level. However, even at the state level they should not be relied upon as a major source of revenue. But, they are certainly not something that fits our discussion on federal taxes, except as a comparison, to demonstrate the problem of tax volatility.

Income Tax – Corporate (paid by the individual):
The Corporate Income Tax is second only to the Severance Tax, in volatility. The reason for this is so simple that it can be described in one sentence. During times of recession, not only do businesses earn less profit, on which to be taxed, but many are able to write-off large losses, which also substantially lowers their tax payments.

If any branch of government is relying on Corporate Income Taxes for a large part of their revenue, then they can expect significant volatility in their revenue collections.

And, yes, Corporate Income Taxes are paid 100% by individuals. Businesses treat all taxes as just another cost of doing business. Of course, every cost of doing business has a profit margin applied to it and that amount is passed on to the consumer in the final retail price of the product. So not only does the consumer have to pay those Corporate Income Taxes, but the consumer also pays a profit margin on top of those taxes.

Income Tax – Personal (paid by the individual)
The thing that makes Personal Income Tax volatile, is that in a recession, a taxpayer who loses his job, pays ZERO Personal Income Tax. It’s not a gradual drop. The taxpayer’s salary goes from XXX dollars to ZERO dollars. That means that his tax liability drops instantly to ZERO. This applies to every person who loses a job in a recession, including those who have savings to live on, be it a modest amount or a million dollars. Many of those people won’t change their life-styles. If a person’s tax liability is based on his INCOME, then when his INCOME goes to ZERO, so does his INCOME tax liability. It should be noted that seldom do unemployment benefits rise to a taxable level, under a Personal Income Tax.

Others, who see their hours reduced, will pay less tax, than before. But many will still be earning enough to pay some amount of income tax. If that were the case for every worker, then a Personal Income Tax would not be nearly as volatile as it is.

It’s the fact that people who completely lose their income in a recession, suddenly pay ZERO income tax, that causes such dramatic Personal Income Tax Volatility.

Value Added Tax (paid by the individual)
Although a VAT is touted as a consumption tax, its effect is to tax all the businesses along the line, for the value they add, which interestingly, is roughly analogous to income, and then pass that tax on to the next value adder down the line, till the whole thing is collected at the cash register. In other words, it’s being collected at the cash register, like a sales tax, but the consumer is actually paying the income tax that each company in the line of production owes. The tax authorities just change the description from “income tax” to “value added tax”, to make it sound more palatable and tax the product at a slightly different level. In the end, the individual pays all of the tax, at the cash register, like a sales tax, but with much different effect.

However, since a VAT is collected all along the line, if any or all intermediate companies have losses that can lower the value they add, it means that the VAT suffers from some of the same problems as a corporate income tax. Of course, a lot of this is dependent upon the VAT calculation method, of which there are three basic types – Addition Method, Invoice Method, and Subtraction Method. Some methods are more susceptible to Tax Volatility than others. On the positive side, a VAT does benefit from the feature that it is collected at the cash register, like a sales tax. The end result is that, based on the particular type of VAT, the volatility will be somewhere in the range of worse than a sales tax, but better than a corporate income tax.

It should be noted that a VAT, like a poorly conceived sales tax, will significantly hurt the poor, during a recession and at the time of this publication, no such VAT has ever been proposed in any session of Congress. But this article is about Tax Volatility and when considering only Tax Volatility, a VAT ranks rather high, in that a properly conceived VAT can offer a fair degree of stability to tax revenue.

Sales Tax (paid by the individual)
Sales Taxes are the only form of tax, other than a Property Tax, that offers a solid buffer to volatility, as the economy fluctuates. Furthermore, a properly structured sales tax more equitably and automatically re-distributes the tax load, during a recession. Although there are many differently structured sales taxes around the country, all are somewhat to extremely stable. But not all are equal or fair to low income earners, during a recession.

For our purposes, since we are talking about federal taxes and since the only Sales Tax bill in Congress is HR-25 (The FAIRtax Act of 2021), we’ll use this as our model for a sales tax.

The reason why any Sales Tax is so forgiving of economic fluctuations is that even in a recession, people still have to buy groceries, pay electric bills, and put a roof over their heads. Even those who are unemployed have to eat and put a roof over their heads. They might spend less on groceries and discretionary spending. But they will still spend money and, unlike with an income tax, they will still pay a sales tax – thus less Tax Volatility.

This might sound unfair to those who lose their jobs in a recession, since many of those who are out of work can’t afford to pay tax on even basic necessities, during a recession. But this discussion is about Tax Volatility and the point here is that regardless of other issues, just about any sales tax is going to be less volatile than any type of income tax or VAT, for this reason. Even so, since we are talking about the FAIRtax, there is a very positive answer to that concern of tax fairness, during a recession.

Under the FAIRtax, if a person loses his job during a recession and he does not have savings, his spending will quickly drop below the poverty line, which will reduce his NET FAIRtax burden to ZERO. In some cases, a person may have been living a good bit above the poverty line, but ends up living only a little bit above the poverty line. That person will have a significantly reduced FAIRtax liability. On the other hand, those who have plenty of savings to dip into, for living expenses, may change their lifestyle very little, if any at all. So their NET FAIRtax load will remain the same or nearly the same as it was, before the recession. The FAIRtax automatically adjusts to fit the changing spending habits of the taxpayers.

Due to the function of the FAIRtax Family Consumption Allowance (often referred to at the “Prebate”, because it comes to the taxpayer before the tax is paid), NO FAIRtax is paid on spending up to the poverty level. The income tax tries to un-tax poverty level income, through the standard deduction. But due to the payroll tax and embedded corporate income tax, in the prices of retail products, the standard deduction does a very poor job of un-taxing poverty level income. By contrast, the FAIRtax “prebate,” which is a sales tax version of the standard deduction, very accurately un-taxes cost-of-living expenses and only such expenses.

The net effect is that, under The FAIRtax, tax volatility will be significantly reduced, while at the same time insuring that those who are most vulnerable, in a recession, will pay little to no FAIRtax. The FAIRtax that is collected will come from those who still have money to spend and who continue to contribute to government revenue, through their spending, based on the level of that spending. There are no sudden losses that would directly affect revenue. It’s all proportional, based on consumer spending.

It’s a WIN for the government, in that it creates a more stable revenue stream and a WIN for the taxpayers, rich or poor, in that it automatically and proportionately adjusts to the changing spending habits of individual taxpayers.

So contact your congressman and senators and tell them that you want them to support the FAIRtax.

If you are not aware of the FAIRtax or just want to learn more, I strongly encourage you to read these three books that explain the FAIRtax very well. Also, check out https://fairtax.org

John GaverJohn Gaver is an author and compensated public speaker, who writes and speaks on tax policy issues that span party lines. He has appeared as a guest on numerous broadcast radio programs in the USA and abroad, including such programs as CNBC’s “Opening Bell” and “The Tamar Yonah Show” on Israel National Radio. Read John’s most recent book, “The Rich Don’t Pay Tax! …Or Do They? — Second Edition – Revised and Expanded”, available in print and ebook format, on Amazon, Barnes & Noble, the Apple iBookStore, and other booksellers.

Follow us on social media