This is a rush transcript from "Your World with Neil Cavuto," December 12, 2007. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: Iowa, you just heard the debate here on FOX. You just heard our polling audience declare Mitt Romney the winner. But, in Iowa, in the polls, he is not, not by a long shot. This guy is.

With us now, GOP presidential candidate and president front-runner as well, Governor Mike Huckabee.

Governor, good to have you.

MIKE HUCKABEE (R), PRESIDENTIAL CANDIDATE: Thank you, Neil. Great to be back with you.

CAVUTO: This was a weird debate, Governor. Alan Keyes was there. I don't — I don't — is he running for president?

HUCKABEE: Well, apparently, he is. I was somewhat surprised when I walked out on the stage and I saw the podium for him, because he has not participated in the others. And I don't know that I have seen him campaigning in any of the states, but he was here.

CAVUTO: All right. Do you know who invited him?

HUCKABEE: No, I don't. I mean, obviously, the debates are in the charge of the newspaper and the local Iowa public television.

CAVUTO: All right. I have so much to get into, Governor. So, if you will excuse my impolitic remark here, what did you think of the moderator of that debate?

HUCKABEE: Well, I think she handled it overall fine.

I was kind of looking for a little bit more interaction with the candidates...

CAVUTO: Right.

HUCKABEE: ... and perhaps a little bit more liveliness.

Frankly, given all the liveliness I have been through the last few days, it was kind of nice to walk away...

(LAUGHTER)

HUCKABEE: ... with all my blood still in my body.

CAVUTO: She kind of reminded me of the school mom on Charlie Brown, but that was just me.

But, Governor, in a way, you just hit on it. Because maybe this debate was a stilted format, they really couldn't lay any gloves on you, which, presumably, is the position you want to be in if you're the front-runner in the polls, as you are by a fairly substantial margin in Iowa. What do you make of that?

HUCKABEE: Well, I think it was maybe an opportunity to actually discuss issues.

I'm convinced that a lot of people across America, including — and maybe especially — people in Iowa, are really tired of the sort of hacking up and kneecapping kind of politics that we have seen.

It's very distasteful to most people in Iowa. I think Americans want to vote for somebody, not just against somebody. And, so, in that respect, people at least got to see what our answers were to the questions, even though, at times, I wish we had had a little more time to get into some of the depth of issues.

But, frankly, Neil, that's one of the problems of all these debates, 30 seconds to answer a two-minute question is really kind of difficult. And it's been one of the common problems of all of the debates.

CAVUTO: Yes. Well, I would agree with you on that, Governor.

Naturally, being the economic nerd here at FOX, Governor, I took particular interest in the economic-related questions. And, when you referred to taxation in this country — and I hope I have your wording right — you said, excessive taxation penalizes the productivity of a company.

Did I take that to mean, Governor, that you would be open — I know you're for a Fair Tax, but you would be open for lowering corporate taxes beyond what we see now?

HUCKABEE: Oh, eliminating them. Corporations don't pay taxes, Neil. They just pass it on to the customers in the form of higher prices. There is no such thing as a corporate tax. All you do is build it in.

And it creates an invisible tax that the average taxpayer never knows he has paid. That's why I'm for the Fair Tax. The reason we need a transparent tax system, rather than the one we have, is because taxpayers are paying taxes hidden into the products, hidden — taken out of their paychecks. They have no idea how much tax they really do pay.

CAVUTO: But, you know, the rap against you for that position on corporate taxes is that you are in the pocket of corporate fat tax — fat cats. What do you say?

HUCKABEE: Oh, the last thing.

In fact, the big business people are the ones who are most afraid of me, for reasons I don't understand. But I would also make the argument that the real reason that this makes more sense is because of small business, where 80 percent of our jobs come from.

And it's real tough to crank up a small business today, because the large businesses have plenty of lawyers and accountants to keep them in compliance. I'm talking about that guy that starts out on his kitchen table with a sketch of a dream and an idea to start a business.

He can't afford all those compliance issues. And that's why we need to make it much simpler to achieve the American dream, by making the tax system one that is met at the consumption level, not at the productivity level.

Imagine what kind of productivity and entrepreneurial leadership we would turn loose if we didn't complicate people with all of those issues of taxation, regulation, and litigation.

CAVUTO: Let me ask you this, Governor.

Yesterday, on FOX Business Network, we — we had Senator Hillary Clinton on, along with Warren Buffett, both of whom are espousing raising taxes on the upper income. It is a moving target, as you well know, sir.

HUCKABEE: Yes.

CAVUTO: But the argument for that is that, that is a way of evening this great divide.

What do you make of the strategy of raising taxes on the upper income, since that is the group that has benefited the most substantially in this boom?

HUCKABEE: Well, again, it's a very wrong-headed idea, and it doesn't help the economy.

It doesn't even help the people at the bottom. Nobody is more a champion of the folks at the bottom than me. But I want people to understand, my goal is not to make rich people poor. It's to make poor people rich.

And the way you do that is, you have a system that doesn't penalize folks in the middle and at the bottom. But neither do you penalize the ones at the top for being productive, because that creates jobs. That opens up marketplaces. That is exactly how people can have better wages.

So, this — this nonsense that the Democrats say, if you just go after the folks at the top, if they don't have that capital, what do they do? They quit investing. They quit expanding. They don't do new product development. They don't do research and development.

CAVUTO: But could you see a scenario, Governor, where you would, as president, have to raise taxes?

HUCKABEE: No, I don't. I can't see that.

I think that our problem is not that taxes are too low. It's that spending is too high and that the burden of the tax is really shifted among too few people. Again, the Fair Tax redistributes the tax burden. You actually untax the poor and the elderly. You don't raise the taxes on people.

People raise the taxes on themselves at consumption. But you end the underground economy, which is where we lose billions of dollars in taxes every year.

CAVUTO: But, but it is a progressive — it is a progressive tax. So, populists claim that it hurts the little guy more than — than the big guy.

HUCKABEE: Oh, no.

CAVUTO: What do you say?

HUCKABEE: Not at all, because of the prebate provision of the Fair Tax. Now, frankly, Neil, if that wasn't there, I couldn't support the Fair Tax.

CAVUTO: Right.

HUCKABEE: Then it would be a regressive tax, and it would hurt poor and elderly. But, because of the prebate, you untax basic necessities, which means you really liberate the folks at the bottom in a way they have never been liberated before.

CAVUTO: So, what Rudy Giuliani is espousing, with a flat tax, into something with Steve Forbes, his economic adviser, is talking about, this would be essentially the opposite of that.

HUCKABEE: Well, no.

I mean, I think a flat tax is better than what we have now. I used to think Steve Forbes' idea was — was a good one. And I think it's better than the current system, which everybody hates.

But, when I became familiar with the Fair Tax and, frankly, the level of research that went into it, that it was developed by some of the leading economists of this country from the top institutions of this country, I became convinced that the flat tax is nowhere near as effective an economic engine to stir the economy and to really revitalize investment as is the Fair Tax.

But the best thing about it, where the flat tax may be beneficial to a whole number of people, the Fair Tax actually pushes the economy. It doesn't just sort of maybe shift it a bit.

CAVUTO: I see.

HUCKABEE: That's why I think that it is the most dynamic of all.

CAVUTO: Let me ask you quickly on a couple of other points, sir. The bailout — he is not calling it a bailout — the rescue package, if you will, for overstrapped borrowers that the president is envisioning, Democrats, Hillary Clinton chief among them, saying that that does not go far enough.

Where do you stand on that?

HUCKABEE: Well, again, the Democrats are really wrong, because the last thing we want is taxpayers to start bailing out people who made bad business decisions.

If that's the case, then, I'm going to go out and buy a Ferrari and then say, I can't afford it, but let me let all the other car buyers who bought Toyotas pay for my car payment and theirs, too. What nonsense.

What we needed to do is to recognize this was a market decision between borrower and lender. Both have some culpability. I'm glad for what the president didn't do. And that's to try to bail out every person who bought more house than he or she could afford, and to bail out lenders who made loans they should never have made.

We have to be a little careful. If you take consequences away from the people who borrow, and you take also the capacity of the lender from being able to recover their investment in terms of the — the loan, we just have to make sure this — this package deal here doesn't go so far that would...

CAVUTO: Right.

HUCKABEE: ... put a chilling effect on future loans from banks.

CAVUTO: Governor, maybe owing to your standing in the polls right now, at the top of the heap, you are a target for your opponents, most notably the man who was...

HUCKABEE: I have noticed that, yes.

CAVUTO: ... leading in...

(LAUGHTER)

CAVUTO: ... who was leading in the polls, Mitt Romney, who apparently, judging by our own internal tracking survey here, scored very well in the debate.

I don't know whether that is a residual fallout from this ad he is running, the record, where he questions your conservative credentials. But he seems to be registering again. Are you worried?

HUCKABEE: You know, I'm going to stay with my message. It's registering. I know that. And the thing he has tried to attack on in the first negative attack ad in the campaign, I should be flattered that it's pointed at me.

But, you know, here's what I have to remind people of. The director and the founder of the Minuteman Project, Jim Gilchrist, who is probably the leading voice on immigration reform, has endorsed me. If he thought Mitt Romney had a better plan, he would have endorsed him. So, that's an issue he can't lay on me.

I did have a conservative tenure, cut taxes, actually shifted the deficit to a surplus during my tenure, balanced a budget. So, I have got a good record. And I think it's one I can run on and the people of Iowa, as well as the people of the rest of America, seem to be responding to pretty well.

CAVUTO: All right.

So, this report here, the Democrats are secretly salivating at you being the nominee and are doing everything in their power to make sure you're not overly criticized, at least on their part, because they want you, what do you make of that?

HUCKABEE: I make of that that it was probably created by one of my Republican opponents, because another poll showed that I was leading all other Republicans in actually beating Hillary Clinton.

And so, you know, there is an old saying. Figures lie, and liars figure. So, I'm just going to tell you that there is probably a lot of nonsense to that poll. I'm very confident that nobody could win more than me.

And I will tell you why. None of the other candidates running for president has actually run against the Clinton political machine. I have.

CAVUTO: All right.

HUCKABEE: And I beat it four times in Arkansas. Nobody can say that. I can.

CAVUTO: Governor, you noticed they weren't jumping ugly with you when you were 100 pounds heavier. I think then you have just got to eat again.

(LAUGHTER)

CAVUTO: All right, Governor, thank you very, very much. Very good seeing you.

HUCKABEE: Thank you, Neil. Appreciate it so much.

CAVUTO: All right, Governor Huckabee.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

Content and Programming Copyright 2007 FOX News Network, Inc. ALL RIGHTS RESERVED. Transcription Copyright 2007 Voxant, Inc. (www.voxant.com), which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon FOX News Network, Inc.'s and Voxant Inc.'s copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.