Sunday, November 25, 2007

Thoughts on the Flat Tax

With the election a year away, I am hearing once again folks on the right calling for the flat tax. And what could be fairer, right? Rich people pay X%, and poor people pay X%. How nice. The claim is that it would be simpler and fairer.

But as a matter of fact, a flat tax would no simpler and LESS fair.

The idea that taxes are complex because they are progressive is a transparent load of dingo's kidneys. Taxes aren't complicated because they're progressive. That's obviously a fake argument. It is VERY EASY to figure out what you owe on your income: you just look it up on a chart. The hard part is figuring out what your income IS in the first place. That's what makes taxes complicated.

And almost every single complexity in the tax code was placed there at the behest of the same people who are calling for a flat tax - wealthy folks who wanted this piece of income or that piece of income declared deductible so they could pay lower taxes. That's WHY it's complex - for the sake of people who are COMPLAINING that it's complex.

And you can GUARANTEE that if a flat tax is passed, the NEXT DAY the same people will start lobbying and paying off politicians to get a large portion of their income declared deductible - but now on a FLAT tax rate. And they will almost certainly succeed. And you will wind up with INSANELY regressive taxes. The middle class paying 15% on ALL of their income, and the wealthy paying 15% on HALF their income.

The fact is taxes ARE pretty flat NOW, if what you mean is the percentage of GROSS income.

And I'm sorry - wealthy people DON'T have a terribly complex time doing taxes. They have a less complex time than anyone. They hire somebody. That's all. They pay someone 200 bucks to do the taxes FOR them, whereupon they save thousands. How HARD that is, eh?

And hey, if they want to do the taxes themselves and keep it simple, that's easy: just forego all the fat deductions that FAVOR them, and just take the Standard Deduction, like the working class does.

Any takers for that handy-dandy, easy way for the wealthy to simplify their taxes?

I thought not.

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