Mitch Daniels’ recent suggestion that the federal tax code be replaced with a combination of a flat income tax and a value-added tax (VAT) has raised the ire of the GOP’s conservative base, which fears that the stealth nature of the VAT would remove from public opinion any downward pressure on government growth, and which associates the VAT with the stagnant economies of Western Europe.  Interestingly, Rep. Paul Ryan, the GOP’s foremost “ideas guy” in Congress today, both opposes and supports the value-added tax, depending on the manner in which it is implemented.  Here’s CATO on Ryan’s tax proposal:

Rep. Ryan would radically simplify today’s hopelessly complex, cumbersome and bureaucratic tax code. He would give filers a choice: They could pay their taxes under existing law, or they could choose a new simplified code, with just two tax rates (10 percent on the first $100,000 for joint filers; $50,000 for individuals, and 25 percent above that).

His plan would offer virtually no deductions or exemptions, except for an increased standard personal deduction and exemption of up to $39,000 for a family of four. He would also replace our current anti-competitive corporate income tax – the world’s second-highest, at 35 percent – with an 8.5 percent business consumption tax (essentially a value-added tax), and eliminate taxes on capital gains and dividends. Although not everyone agrees with this particular approach to business taxation, Rep. Ryan understands that we must bring our corporate taxes in line with those of our competitors if we want to increase economic growth and create more jobs.

So a quasi-flat income tax and a VAT — a plan that sounds a heck of a lot like Daniels’ tax plan.  Yet Ryan is deemed Jack Kemp 2.0 by conservatives, and rightly so, while Daniels is a raging RINO who likely spends his evenings sipping cocktails with Mike Castle, David Brooks, and David Frum.  What gives?

The answer is that Ryan has been much better at the politics of the issue.  First, he has never referred to his consumption tax as a value-added tax or VAT.  Instead, Ryan touts his “business consumption tax” that would replace the corporate income tax.  Secondly, Ryan has come out strongly against a VAT on numerous occasions, blasting the Democrats for their suspected desire to impose such a tax on the nation in addition to the current tax code.  In so doing, Ryan is both politically savvy and intellectually consistent.  Substantively, Ryan supports a value-added tax as part of a sweeping overhaul to our nation’s tax code, as does Daniels, and opposes a VAT if introduced in addition to the current tax code.  But by using the term “business consumption tax” to refer to the “good” sort of VAT, which, in Ryan’s view, is the kind that replaces much of the tax code, and by sticking with traditional VAT terminology when discussing the “bad” sort of VAT, the kind that adds to the current tax burden, Ryan avoids any psychological connection in the minds of voters between his conservative tax plan and the left-wing economic policies of Western Europe with which the VAT is generally associated.

All of this suggests to me two things.  First, if Mitch Daniels actually got to be president, he’d probably be the most economically conservative POTUS since Reagan, if not Calvin Coolidge.  His actual policy ideas, when divorced from tonal considerations and political word association games, are definitely in Ryan territory, which is essentially modern-day Kemp territory.  Secondly, this whole ordeal proves that politics is still politics.  This is not the board room, where concepts are evaluated on substance by a room full of MBAs.  Politics requires prospective leaders to effectively communicate their ideas to the teacher, the doctor, the brick layer, and the plumber, all of whom have far too little spare time to spend it poring over the intracacies of public policy.  Daniels opponents have already begun transforming him into the latest incarnation of Nelson Rockefeller and there’s far more to come unless the Indiana governor gets serious about the political realities of the nation he seeks to govern.  Otherwise he will find out what Mitt Romney discovered in 2008 — that Power Point skills are meaningless in politics, and what voters really want is a leader who can feel their pain.

As of now, Daniels has managed to garner two major strikes against him — he’s a modest fellow during times when modesty is confused with moderation, and his policies sound liberal, even though they are not, because he does not dress them with the ornaments of contemporary right-wing politi-speak.  His chiding of Tea Partiers for their “pessimistic” and “statist” rhetoric isn’t very astute either, given that the Hayekian governor should be their natural ally.  Let’s hope Daniels’ gets his political antenna back from the repair shop soon.