This is written by a friend of mine who asked me to post it for him. I agreed because... well, because I agree!
When Are People Going To Finally Get Fired Up Enough To Demand Change In Our Screwed-Up Tax System?
by Craig Vanbebber
On January 27, the Wall Street Journal printed an editorial from Stephen Moore, a senior fellow in economics at the Cato Institute, entitled “How Much Tax Would You Like To Pay?” in which he outlined a very simple but effective plan for the creation of a flat tax system he calls the Alternative Maximum Tax (AMT). The tax rate would be a fixed 20 percent. But if a taxpayer was emotionally or philosophically tied to the existing code, or discovers that he/she would be paying less than 20 percent under the current system, that person could continue under the present system indefinitely, until he/she decided to either move to the AMT or exits the system (death, income drops below taxable level, etc). But new workers entering the workforce would automatically be enrolled in the AMT system, having no option to participate in the current debacle.
This makes a lot of sense on many levels, but perhaps the most compelling argument for the AMT or a variant thereof is the ability of a flat tax to remove the inherent discrimination and abuses within the system. For example, two individuals making exactly the same wage and having predominately the same lifestyle can conceivably be paying a wildly disparate tax bills due to investments, shrewd or unscrupulous tax advisors and the like. With the ATM or flat tax, both individuals would pay relatively the same amounts, with only slight variations due to the amounts given to charities (as one of the only a handful of possible deductions). Additionally, those individuals in higher income brackets would have no tax loopholes into which untold millions (billions?) of dollars are regularly hidden from the taxman. Even though the wealthiest one percent of all Americans pay 33.9 percent of all income tax collected by our government, the AMT would certainly be more fair than what we have now.
So is this flat tax idea nutty? Most of the leading economists in America do not think so. Another editorial in the Journal in 1996 quoted many of America’s top financial minds regarding their thoughts about the flat tax. Here’s what they said:
“The basic structure of the flat tax… offers a recipe for a uniform, simple, airtight, fair system.” – David Bradford, professor of economics at Princeton University
“A single tax rate on all income above an exemption would restore the tax system to its proper purpose. It would make it difficult, if not impossible, to manipulate the tax code to favor, or punish, special interests.” – Milton Friedman, senior research fellow at the Hoover Institute and a Nobel laureate in economics
“Every economist believes that a flat tax would raise economic growth.” – William Poole, professor of economics at Brown University
Should I go on? OK, I will!
“… the double taxation of corporate income would end – all business income would be taxed once, at the level of the firm, increasing fairness and efficiency.” – Harvey Rosen, chairman of the department of economics at Princeton University and former deputy assistant secretary of the U.S. Treasury
“A flat tax that eliminates most deductions would be far more efficient and equitable than the present tax system.” – Gary Becker, economics professor at the University of Chicago and a Nobel laureate in economics
“A uniform-rate tax on all income, by whomever received and in whatever form, with no exemptions or deductions, should be the primary revenue source in a society that values the rule of law.” – James Buchanan, Nobel laureate in economics and a professor at George Mason University
“A flat tax is sound. A movement to a flat rate tax – with no change in government spending – would stimulate economic growth….” – Robert Barro, economics professor at Harvard University
There’s more, but I could go on all day.
How many of the country’s leading economists have to back the flat tax before the American taxpayer figures out it’s a good idea? Isn’t it about time that the country had a tax system that the average citizen could not only understand, but fully support? That’s certainly not the case now. Our tax system is a complete joke. The current tax code is so absolutely arcane, even the most seasoned tax accountants have difficulty keeping up with the yearly flood of new tax law that is foisted on the system by lawmakers trying to scratch some imperceptible itch within their constituency or brought on by special interest groups.
As our system now stands, according to The Dallas Morning News, if you earn more than $56,085 in a year, you are in the top 25 percent of all taxpayers, and you pay 82.9 percent of all income collected by our government. The bottom 50 percent of all taxpayers pay only 3.97 percent of all income tax in America. Half of America only pays 3.97 percent of their income in tax? The top 1 percent pays 33.9 percent of all taxes? Something’s so screwed up here it’s not funny. Should there be a “poverty” level at which you pay no taxes? Absolutely! But to have 50 percent of the population in that category is absolutely unbelievable. Set a cutoff income (say, $20,000/year) below which you pay only 2 or 3 percent of your income in tax, not the 20 percent level everyone else pays. But NO FREE RIDES should be allowed… everyone pays their fair share as their civic duty.
Taxpayers in America should contact their Congressional representatives in untold droves and DEMAND they support a flat tax, or be voted out of office. This one single issue should so clog the phone and e-mail systems of our elected officials that they are unable to conduct any other business until real change is made.
One real hindrance to the flat tax is the special interest group… those that are quite happy with the current debacle. I’m sure that the major tax preparation firms have dozens of lobbyists in Washington fighting tooth and nail to prevent the idea from every gaining a foothold in the halls of Congress. A flat tax would pretty much put them out of business. But the economic benefit of the AMT or the like to the individual American and the economy at large is far greater than the downside to certain companies or groups. The “it would put us out of business” argument doesn’t hold water.
It’s time for action on our tax system. It’s broken. It cannot be repaired by any means other than a complete overhaul… a new start. For the sake of our future and our children’s’ future, it’s time for everyone to get on board with the flat tax and take action. The alternative is unacceptable.
