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Transcript: GOP Presidential Candidate Mike Huckabee on 'FNS'

The following is a partial transcript of the May 27, 2007, edition of "FOX News Sunday With Chris Wallace":

"FOX NEWS SUNDAY" HOST CHRIS WALLACE: Governor, Welcome back to "Fox News Sunday."

HUCKABEE: Well, thank you, Chris. Happy Memorial Day to you.

WALLACE: Thank you. Same to you, too, sir.

Let's start with one of the centerpieces of your campaign. You say you want to put the IRS out of business and to replace the income tax with a national sales tax, which you call a fair tax. How would that work?

HUCKABEE: It works primarily by replacing the current very complicated tax structure, that is not only burdensome but is extremely expensive — and it's also filled with hidden ways in which Americans pay tax and never think about it.

I'd love to say April 15th become just another beautiful spring day. I'd like to be the president that nails the going-out-of- business sign on the Internal Revenue Service doors, a $10 billion a year industry.

We spend half a trillion dollars on compliance, and the real issue is that many folks at the bottom of the economic scale — they don't have 35,000 lobbyists in Washington working for them like other people do, working over 535 members of Congress.

Here's how the fair tax works. You get rid of income tax. You get rid of all the withholding. You get rid of corporate taxes completely, totally, because those taxes are not really paid by the corporations. They're passed on to the customer with a 22 percent embedded tax in the system.

You eliminate that, which means the prices of what you purchase will go down. You replace it with a 23 percent consumption tax. Now, that sounds expensive, but here's what happens. You only pay when you purchase something new, whether it's a product or it's a service.

And the point is it's a completely transparent tax system. It doesn't increase taxes. It's revenue neutral. But here's what it will do. It will bring business back to the United States that's leaving our shores because our tax laws make it impossible for an American-based business to compete.

WALLACE: But a bipartisan commission that was appointed by President Bush in 2005 looked at this idea, and they found if you eliminate the income tax — and they retained the payroll tax, which you would do away with, as well as the estate tax — they retained that.

If they keep them, you would need a sales tax not of 23 percent but of 34 percent. They also found that the only two groups that would end up paying lower taxes under your plan are people making less than $30,000 and people making more than $200,000.

HUCKABEE: Well, I think some of their findings were flawed in part because you've got to remember some of the people working on that commission have a vested interest in keeping the power center in Washington rather than in the purse strings of the average American.

The fair tax was designed by economists from Harvard and Stanford and some of the leading think tanks across the country who didn't come in with an agenda.

They came in with an idea of take a blank slate and say what would be the fairest, most equitable way to create a tax structure that Americans could not only live with, but that would spur real growth in the economy. And the result was the fair tax.

So I'm convinced that there's a reason 80 percent of the American people think we need a major overhaul of the tax structure. And, Chris, only 2 percent of the American people like it the way it is.

WALLACE: But let me give you an example. Let's say a person, a very lucky person, makes $2 million a year. He lives very well off the first $1 million and he banks the second $1 million. He doesn't pay a cent of taxes on that second $1 million. How is that fair?

HUCKABEE: Well, why would we penalize his productivity? Why is that right to penalize a person's productivity?

The genius of the fair tax is that there is a prebate, so that every month a check comes that would be the equivalent of what a person would pay in their basic necessities. That's why it's really fair. In fact, I think it's a progressive tax for people at the lower end of the economic spectrum.

But the fairness of it is across the board. It's fair to the people at the lowest end. It gives them a real shot to reach up to the next rung on the ladder, a much fairer system than the current one, which penalizes them for trying to do better.

But the best part is that if you don't consume a whole lot — if you, for example, want to save money — you're not penalized for saving money like our current system.

But the best thing about it is that when you get your paycheck, you get the whole thing. You get the entire paycheck. The government doesn't take it out.

The average American doesn't understand exactly what's going on with his paycheck, because April 15th — if he gets a refund, he says, "Look, look how much I'm getting back." The question is but how much did you pay in.

WALLACE: For all the talk about cutting taxes, you have come under fire for your record in your 10 years as governor of Arkansas.

Here's what the Cato Institute, which is a conservative think tank, said about your record as governor of Arkansas on taxes. "Mike Huckabee went from being one of the best governors in America to one of the worst. He receives an "F" for his current term and a "D" for his entire tenure."

And Americans for Tax Reform, another conservative group, says you were responsible for a 37 percent higher sales tax, 16 percent higher fuel taxes and 103 percent higher cigarette taxes.

Governor, a tax cutter?

HUCKABEE: Well, I am. Ninety-four times we cut taxes in Arkansas, including the first ever broad-based tax cut in the history of my state in 160 years. And I did that with a Democrat legislature.

WALLACE: But how do you answer those figures?

HUCKABEE: But as we talked about in the debate, when I was attacked by one of the other candidates, the fact is the fuel tax was a part of a road program that was voted on by the people of my state by an 80 percent margin.

Most every politician I know would love to be with 80 percent of the people, because we needed roads. We needed them desperately.

And the amount of money that we spent on our roads more than made up for the amount of money people were spending in car repairs from the disrepair of our road system and the lack of economic activity.

Now, the sales tax was one that was in response to a Supreme Court order in education. We had an equity adequacy issue in our state.

Let me suggest to you, though, that one of the differences — in fact, one of my critics in the debate suggested that the tax issues were a problem.

But when I left as governor, I left the next administration with nearly $1 billion dollars in surplus, giving them the opportunity to cut the taxes even more, as opposed to leaving somebody with a huge deficit and forcing them to have to...

WALLACE: Obviously, there are numbers — and you know the numbers a lot better than I do.

HUCKABEE: Sure.

WALLACE: But on the other hand, the Club for Growth, another conservative group, says this — and let's put it on the screen — about your 10 years as governor. They looked at the record, and they said, about you, "His history includes numerous tax hikes, ballooning government spending and increased regulation."

HUCKABEE: Well, once again, you know — the Club for Growth, with all due respect, tends to take a template and apply it over all 50 states without looking at the unique nuances.

For example, if they talk about government growth, the part of government that I actually had control over as a governor, not the federal pass-throughs, not the various programs that maybe were controlled strictly through the legislature, was .6 of 1 percent per year over a 10.5-year period.

I would suggest that that's a pretty darn good record of holding down the level of growth in government by anybody's estimation except theirs, because, again, they don't want to do the depth of homework necessary to really drill into the fact that each state has a different way in which it conducts its budget.

WALLACE: You say that you are a clear, consistent, proven conservative; in fact, the most so in the field. Let's do a lightning round. Quick questions, quick answers...

HUCKABEE: OK. All right.

WALLACE: ... about your rivals in the Republican field. And let's talk specifically about the conservative credentials or lack of same for the Republican frontrunners in the field.

Rudy Giuliani. Why isn't he a conservative?

HUCKABEE: Well, his stand on some of the social issues, I think, are going to be very problematic for conservatives — his position on the sanctity of human life, same-sex relationships.

I have a lot of respect for him. I don't want to minimize that. And he's a strong individual. But those are issues that are certainly going to be problematic within the Republican primary.

WALLACE: Now, you, before the debate, had compared his stand on abortion to slavery, saying, "You know, it would be like saying well, I'm against slavery, but if other people want to do it —" He said that's bogus because nobody is for slavery.

HUCKABEE: Well, but here's the point. He made the reference that he was opposed to abortion personally and — here was the catch — thought it was morally wrong.

Now, my point was logically — and I'm an old debater from high school and college, Chris, so you always try to follow something to its logical conclusion. If something is morally wrong, then you should oppose it because of its moral impropriety.

Now, if you say I don't think it's morally wrong, therefore I can logically conclude that it's OK to have it.

But once something has been deemed to be morally wrong, then it's like Wilberforce felt about slavery. And he didn't have a choice. He had to take the position of opposition.

So that's why I think that you have to either say, "I don't have a moral objection to it, and therefore I can conclude that abortion is OK, it's tolerable," or, if it's morally wrong, then we ought to do something to make sure that it really doesn't happen.

WALLACE: John McCain.

HUCKABEE: A lot of respect for John McCain. In fact, you know, he's one of the targets. A lot of people are after him. But let's not forget something. He's an authentic American hero.

On this Memorial Day weekend, I'm not going to say anything bad about a man who spent years of his life being tortured in a Vietnamese prison. And for him, I have the highest regard and esteem and respect.

WALLACE: But why do you think — and we all share your sentiments.

HUCKABEE: Yes.

WALLACE: Why do you think he's not a reliable conservative?

HUCKABEE: He's been in the Senate too long. You know, governors run something. They don't just make speeches and work on bills. They have to actually manage things. I think that's why four out of five of the last presidents have been governors.

Again, I appreciate even — though I disagree with some of the elements of the bill, Senator McCain has at least worked on the immigration issue and has been pretty bold in putting a stake in the ground over it. You know, he's taking some political risks.

But I think that anyone with a Washington address does not have the advantage going into this presidential race.

WALLACE: Mitt Romney.

HUCKABEE: Good friend, good colleague as a governor. Again, the challenge Mitt's going to have is defending the various positions he has.

We have a saying in Arkansas that if you don't like the weather, hang around five minutes, it will change for you. And I think the perception is that Mitt's position on guns, his position on same-sex relationship, his position on the Bush tax cuts, his position on sanctity of life are all issues that there's been, you know, literally 180 degrees difference in those issues.

WALLACE: He says he's learned. His says his position is involved and he's learned from experience.

HUCKABEE: Well, we all can have adult epiphanies, but I'm not sure how many we can have before at some point people begin to question are we going to have another one in another couple of years.

WALLACE: And let me ask you about one candidate who isn't in the race but apparently may be getting in soon, and he says he's going to be the true conservative, Fred Thompson.

HUCKABEE: Fred Thompson certainly will have a real presence in the race. You know, and I don't know enough about his record in terms of the issues but, you know, I think any of us who are running have to recognize that there's going to be room even for more than the 10 who are already on the stage.

WALLACE: You didn't use the word flip-flopping, but that's, in effect, what you were saying about Mitt Romney.

Some of your Republican rivals accuse of you flip-flopping. You opposed the immigration plan now in the Senate. You call it amnesty. But here's what you proposed for illegals in March. "You're going to pay the fine. We're going to have a system that can be done in an orderly fashion, and you'll be able to be legal, but we're not going to let you off scot free."

As governor, you opposed making children of illegals — rather, you supported making children of illegals eligible for state support and scholarships.

You said that a bill cutting them off from welfare was race- baiting. Aren't you a liberal on immigration?

HUCKABEE: No, not at all. I think that the first big mistake we've made is we haven't secured the border, which is the first and most important single step we need to take in immigration reform.

You know, every time I get on an airplane at the Little Rock airport, I'm forced to show my photo I.D., go through several layers of security. I don't just get to walk through, even though everyone knows in Little Rock who I am and they call me by name.

I take my shoes off and put them in the little plastic bucket and go through the whole drill. Now, the reason I do that is because that's the law and they make me go through one at a time.

We have porous, open borders where people jump and run across at will. That's really the fundamental problem with the immigration issue.

Now, in Arkansas, we had a situation where we had kids who had been in our public schools since kindergarten, and when they had worked hard, they had made good grades, my point was this: If you want to punish their parents, that's fine. But you do not punish a child for the crime of a parent.

That's just something we have not historically done.

WALLACE: Finally, and we have about two minutes left, let's talk about your position in this race for the Republican nomination.

You raised just $500,000 dollars in the first quarter, while Mitt Romney raised the most at $20 million. You're still at single digits in the polls in all the key states.

How do you get from here where you are now to the Republican nomination? What's the Huckabee scenario?

HUCKABEE: Well, the key thing is to make sure that I continue to articulate issues that I don't think other candidates are really focused on.

When I talk about education, I've got a record to back it up, but I'm talking about the importance of music and art programs to create a creative economy. People aren't talking about that, but to understand why that's important — to develop both left and right brains of kids so that there is a sense of creativity.

We've got a health care system that needs to be called a sick care system because it has to change culturally from one in which we put the focus on disease to put a focus on health and prevention.

We need to be talking about tax reform. We need to be talking about the infrastructure of our country.

I truly believe, Chris, that once we get beyond sort of the how much money have you raised to what kind of issues and ideas you've raised, people will start making a real concerted effort to look at a candidate.

WALLACE: Real quickly, they're holding a big straw poll in Iowa in August. You have said if you don't show well there, it's going to be a tough go.

HUCKABEE: Yes.

WALLACE: How well do you have to do in Iowa?

HUCKABEE: Well, I have to do...

WALLACE: I'm talking about the straw poll.

HUCKABEE: Yes. Better than expected, which means if I don't finish in the top three — if the margins of four and five are real tight together with one, two and three, then maybe I'm still in.

But clearly, that's a break point not just for me. That's going to be, I think, a break point for a number of us in the race. It's one of the reasons I'll be spending most of my summer in Iowa.

WALLACE: So you're saying if you don't finish in the top three or real close, you're out?

HUCKABEE: Well, I may not decide that, but you know, it may be that you're counted out at that point. But let's see.

First of all, I think what's really critical for me is to continue focusing not on just the money chase and the money race, but the idea race and the chase, because I do think Republican voters are sophisticated enough not to turn the presidency into a plutocracy that makes it only about how much money you've raised.

They want to know, "Do you have any ideas that bring true leadership to this country?"

WALLACE: Governor, we're going to have to leave it there. We want to thank you so much for coming in on this holiday weekend...

HUCKABEE: Thank you.

WALLACE: ... as well as your wedding anniversary. We apologize to Mrs. Huckabee for taking you away from her.

HUCKABEE: I think she's grateful. Thirty-three years of me, and she's probably glad I'm gone for the weekend.

WALLACE: Well, get back home and make it good and safe travels on the campaign trail, sir.

HUCKABEE: Thank you, Chris.