Our Tax System — The Flatter The Better

Our Tax System — The Flatter The Better: I ran across an article by Gary Chapman in the Austin American-Statesman that I thought was worth commenting on. To begin with, Chapman tosses out some very dubious statistics about Bush’s newest tax cut that he doesn’t quote a source for. He also went to complain about the Conservative push for flatter tax rates which is what I wanted to discuss…

“In a message that reflects a growing resistance among the wealthy to any form of progressive taxation, The Wall Street Journal published an editorial calling for an upward adjustment on the tax rates of low-income wage earners, while at the same time The Journal editors believe tax cuts for the wealthy are imperative.

This idea has now penetrated the White House. R. Glenn Hubbard, the chairman of the President’s Council on Economic Advisors, recently told the Washington Post that the “tax burden will have to begin extending backward down the income ladder.” Hubbard advocated, like many Republican legislators, a “flatter” tax system, meaning less progressivism.”

To begin with, I am not a rich man. Furthermore, I don’t have any desire to run for office one day, so I’m not going to need any rich campaign contributors down the line. Heck, I don’t even have any rich friends or relatives.

That being said, I would fully support a flat tax or a sales tax to replace our current progressive income tax. There are several reasons for that…

We currently have a lot of people in our country who pay no income tax or almost no income tax, yet they receive a lot of government services. As the chart on Rush Limbaugh’s page points out, the “Top 50% of Wage Earners Pay 96.09% of Income Taxes.” This is a big problem for our country because we have roughly 50% of our population that has very little incentive to care about government spending or tax increases. What do the 50% of the people who pay almost no taxes care if some pork laden bill comes down the pike, it’s not coming out of their pocket. Why should they care if taxes are being raised if it’s not going to effect them? When are they ever going to support cutting services if they don’t get the benefit of taxes being slashed as well?

The biggest reason we have a progressive tax system in this country is just plain, old, envy. There are a lot of people who can’t stand the idea of someone else having more money than they do. They hate the idea that people like Bill Gates, Alex Rodriguez, or Ross Perot have more money than they can ever spend. In fact, there are a lot of people in this country who are so consumed jealously of the wealthy people among us, that they’d forego a tax cut themselves just to stick it to those rich guys. If you don’t believe that, just look at the strategy Democrats use to attack EVERY tax cut that comes down the pike. Their general argument is always something like, sure you might have the marriage penalty removed & you might get a bigger tax credit for your kid, but some rich guy will get more than you — so therefore you should be against it. That’s the sort of thing that appeals to petty, envious people..but if it didn’t work at least to some extent, the Democrats wouldn’t still be using it.

Flattening out the tax rate would have a myriad of positive effects. It would severely constrain new spending and encourage tax cuts because everyone would benefit from decreased government spending. Then there’s the simplification of our tax code and the possibility of sending in a 1 page tax document that would only tax a few minutes to fill out as opposed to the mess that is our current tax system.

There is even the possibility that a flax tax would increase the amount of revenue collected. Here’s a little info on that from a 2002 Bruce Bartlett column

“Finally, the Russians figured out for themselves that their tax system needed to be overhauled. Against the IMF’s advice, taxes were cut, leading to increased revenue as evasion became less profitable. Two years ago, Russia initiated a major tax reform that instituted a 13% flat-rate tax system. It became fully effective last year, with the result that tax revenue jumped more than 50%, rising to 16.1% of GDP in 2001.”

Last but not least, It we implemented a flat tax, I believe all the factors that we’ve already discussed would create an economic boom in this country that would surpass even the explosion of growth Reagan’s tax cuts produced in the eighties (and we’re STILL riding that wave.)

It’s too bad that class warfare and the politics of envy are so ingrained in this country, because a flat tax would be the most important thing we could do to insure that the next generation of Americans would have even more plenty and prosperity than we have today.

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