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Monday, November 3, 2008

I Now Support the Flat Tax...and Here is Why

There is no doubt that the last couple weeks has sparked a debate over whether or not Barack Obama's tax proposal is in fact, income redistribution. One of the most common defenses of Obama's plan is to point out that our current tax plan is progressive. In fact, this is true. Our tax brackets are 0, 15, 25, and 33%. In other words, as you earn more, more of your money is taken from you in the form of income taxes. In fact, the defenders of Barack Obama's tax proposal are right. Our current tax system is another form income redistribution. Barack Obama is simply making it more extreme.

I don't believe in any idea that has at its roots income redistribution. Just because the current tax system is not as extreme as what Senator Obama wants, doesn't mean that it isn't a bad idea as well. In fact, any and all reasons for supporting a progressive tax system are purely political, not a matter of policy. The reason we have a progressive tax system is because taxes are in many ways doled out by ability to pay. That is total nonsense. Everyone should have the ability to pay their income taxes because taxes should be as low as possible. If our government is collecting, and mostly using, taxes for the right reasons then there need not be any reason for progressive taxes. A progressive tax system is another form of social engineering. It goes under the theory that some have less ability to pay taxes so we tax them a lesser percentage. Some, on the other hand, have more ability to pay taxes so we tax them more. That is far too close to Marx. The progressive tax code punishes people as they make more. As someone goes from making $50,000 to $60,000 to $70,000 more and more of their money goes to taxes. Those aren't wealthy people. Those are folks that are finally seeing the beginnings of economic success. Yet, their success is punished with less and less of their money being kept by them.

The flat tax, on the other hand, is rooted in sound economic philosophy. The flat tax simplifies the tax code. This will create less decision making based on the tax consequence. We have far too much decision making. The worst thing we can do is have an individual make a decision because its consequences will be a boon on their taxes. The flat tax would eliminate any and all such motivation.

The second argument against the flat tax is that it won't bring in enough revenue. First, I'm not sure that is so. Second of all, if it is, hallelujah. If the government doesn't take in as much revenue, then, maybe, finally, it will be time for the government TO SPEND LESS. Anyone bold enough to propose the flat tax will know full well that it must be implemented with serious cuts in spending.

The flat tax is the only tax that takes to heart what taxes are supposed to be, a necessary evil. The flat tax would unleash the power of innovators and job creators. It will simplify the tax code. It will force government to get back to only what government is supposed to do. It will make bloated government and entitlement spending significantly more difficult. Rather than focusing on social engineering, the flat tax will focus on the right thing, the necessary collection of taxes. Since we can't simply go from one to the other, any flat tax idea should always allow for any indivdual to file taxes under the current code as well. I like any flat tax rate under 20%.

2 comments:

Unknown said...

I think you're on the right track, but the "FairTax" has the advantages of the flat tax, plus more. Not the least of which is that it abolishes the IRS. Also, since it is a consumption instead of income tax, it can't be amended later to give goodies to certain groups. Look, we started with a simpler income tax, and now you see what we have instead. The only way to prevent a second go-round is to start over.

www.fairtax.org

Jared A. Chambers
myownterms.com

Unknown said...

I also support the FairTax. It also has the distinction of being the only tax proposal in line with the ideas of the founding fathers who opposed any form of income tax.

There is a reason they made it unconstitutional and we are seeing those reasons in action today. The tax system is being used to pit one American against another for political gain and social engineering. By passing the FairTax, the government will no longer have any reason to know how much money you make, thus they can't use your income against you.

The FairTax also takes a huge amount of power out of DC as they will no longer be able to use the tax code to bully or reward, depending on their political goals.