For anyone who owes money to Uncle Sam, April 15th is not a day you look forward to. Even if you’re getting money back, Tax Day can cause a migraine by virtue of the sheer volume of paperwork required to comply with federal and state tax laws.
What’s even worse, though, is hearing people like Kevin Drum claim that a flat tax would be unfair:
It is dishonest to pretend that flattening tax rates has any connection to simplifying the tax code. It is dishonest to pretend that a flat income tax is “fair” while conveniently forgetting to suggest the same for Social Security taxes. It is dishonest to pretend that “income” is the same for everyone while failing to even mention capital gains, tax shelters, corporate perks, deferred compensation, pension contributions, stock options, or the thousand other options the wealthy have for making money that doesn’t quite count as “income.” It is dishonest not to mention that simple arithmetic guarantees that any flat income tax proposal would raise taxes for practically every middle class family in the country.
No, Kevin, a flat tax would be the very definition of honest. Flat means FLAT. Everyone pays the same rate. The problem is you fly off the handle with assumptions about how those at the higher end of the income scale will maintain every bit of legal income deduction they now enjoy.
Flat tax would have two benefits. First, it’s fair. Second, it’s simple. The simplicity part comes from the complete elimination of adjustments. Your gross income is your AGI, period. This means eliminating all deductions (including mortgages and charitable contributions), shelters, itemizing, and so on. Under a flat tax, everyone should be able to file using a single form. Income x tax rate = your tax bill
Let’s also consider the fact that a flat tax would eliminate the build-in disincentive toward working. Right now you can actually take home more money by making less in some circumstances. Those near the top or bottom of a particular tax bracket have a vested interest in keeping their income down.
But perhaps the fairest tax system would be the national sales tax. At first it sounds unappealing, but Lesley mentioned this the other day and the more I think about it, the better it sounds. First of all, it removes all disincentives for working. You get to keep whatever you make — all of it. It also encourages saving. Lord knows we need more of that. And finally, the wealthy would still pay a lot because they own more expensive cars, homes, and toys. They buy more expensive food, eat out more often, purchase more services, more luxury items, etc.
Another vital benefit to the national sales tax would be the transparency of the system. Right now it’s tough to get a handle on what you pay in tax. There’s income tax, sales tax, property tax, Social Security tax, gas tax, luxury tax, death tax, tax, tax, tax, tax. What do you really pay each year? Have you ever added it all up? It might surprise you.
With a national sales tax, you would see exactly what you’re paying every time you buy something. Of course, this assumes the other taxes were eliminated in favor of a single tax. Again, this would be eminently fair. But those on the left (I do love how they call themselves “progressives”; they’re progressive toward higher taxes) — would never abide by anything so simple and fair. The entitlement mentality seems to preclude rational thinking where taxes are concerned.
The little dribs and drabs of exemptions, shelters, deductions, and other adjustments are the current system’s way of trying to restore some semblance of balance. But this is punishing the wrong party. If we want simplicity and equality, then that’s the kind of tax system we should be seeking.
A national sales tax — or, barring that, a truly flat tax — is the proper way to acheive this goal.