The Problem With Flat-Tax Fever
By ROBERT H. FRANK
NYT
CLOSE watchers of presidential politics weren’t surprised to see many of this year’s Republican hopefuls proposing to replace the nation’s progressive income tax with a flat tax. Such plans reliably surface every four years, and, just as reliably, sink without a trace.
That’s not because the current tax system is far from the abominable tangle of complexity that candidates say it is. Actually, it’s worse. Flat-tax proponents promise to sweep away that mess by imposing a single levy on every dollar earned. That change, many contend, would allow taxpayers to file their returns on postcards. And surveys suggest positive voter responses to several of the most recent proposals.
Yet none will be adopted, for at least two reasons. One is that a flat tax would do nothing to make filing tax returns any simpler. But, more important, it would greatly exacerbate longstanding growth in income inequality.
One Republican candidate, Herman Cain, enjoyed widespread attention when he unveiled his “9-9-9” plan last month. The plan, as he described it, calls for three simple taxes, each with a 9 percent rate. The first is a tax on income, and the second, on goods bought, is essentially a sales tax. The third taxes business revenue. But because it deducts paid dividends and other nonlabor expenses, it amounts to a tax on wages.
(More here.)
NYT
CLOSE watchers of presidential politics weren’t surprised to see many of this year’s Republican hopefuls proposing to replace the nation’s progressive income tax with a flat tax. Such plans reliably surface every four years, and, just as reliably, sink without a trace.
That’s not because the current tax system is far from the abominable tangle of complexity that candidates say it is. Actually, it’s worse. Flat-tax proponents promise to sweep away that mess by imposing a single levy on every dollar earned. That change, many contend, would allow taxpayers to file their returns on postcards. And surveys suggest positive voter responses to several of the most recent proposals.
Yet none will be adopted, for at least two reasons. One is that a flat tax would do nothing to make filing tax returns any simpler. But, more important, it would greatly exacerbate longstanding growth in income inequality.
One Republican candidate, Herman Cain, enjoyed widespread attention when he unveiled his “9-9-9” plan last month. The plan, as he described it, calls for three simple taxes, each with a 9 percent rate. The first is a tax on income, and the second, on goods bought, is essentially a sales tax. The third taxes business revenue. But because it deducts paid dividends and other nonlabor expenses, it amounts to a tax on wages.
(More here.)
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