The Flat Tax Proposal

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The Flat Tax Proposal
Consider what government is all about. It can be summed up in one word: Taxes. Regardless of location, party denomination or political structure, just as an army reputedly "travels on its stomach," a bureaucracy travels on its citizens' billfolds, and everyone entering government service sooner or later comes to share this attitude. Left to the devices of the officials, there is no limit to the amount collected, and any attempt by the payors to minimize the tribute will be met with warnings of dire consequences that never end. In California, home of the famous (or infamous) Proposition 13, the initiative measure which in 1978 cut property taxes by half and limited future increases to 2 percent per year, tax beneficiaries to this day blame every malady except the sinking of the Titanic on the passage of that proposition. The fact that the state and all its political subdivisions are literally awash in money does not dampen the enthusiasm of many to rescind that law.

As the intent of the collectors to shear the public is clear, so is the attitude of the shorn. It requires no great awareness to understand that your money is taken. For this reason, the politicians must regularly genuflect to the concept of tax relief, and an endless variety of proposals are periodically floated to convince the citizens that their best interests are uppermost in the minds of their leaders. Think back, if you will, to the spectacle of political candidates falling all over themselves with conflicting tax reduction plans prior to the 2000 national elections. The called-for relief stressed the conventional palliatives including marital deduction reform, capital gains revision, and general rate reduction. As predictable, the sound and fury following the election came to mostly nothing, short of ballyhoo over how each citizen might best spend a $300 per head governmental gift.

One of the more fascinating suggestions that surfaces from time to time is the idea of a "flat tax." As the concept is actually taken seriously, it is worth discussing. Income tax in the United States is assessed and collected in what are known as "brackets," of which five presently exist for the average taxpayer. As a person's annual taxable income rises, the rate at which it is taxed increases with each higher bracket. A tax system with a wide percentage variance between the lowest and highest brackets is referred to as progressive. The proponents believe it fair that those with the larger incomes pay a greater percentage of that income in taxes. However, it is by the granting of various exclusions, exemptions, deductions, and credits that taxation of income takes on its true character, and it is through the use of these devices that the effective rates are distorted into a bewildering array of meaninglessness.

This brings us now to the flat tax, which, at its simplest, is the taxing of all income from whatever source, with no exemptions or exclusions, at a single rate. This concept is propounded from time to time by various political candidates in the hope that its simplistic approach will somehow capture the hearts and imaginations of the beleaguered tax-paying voters. Its supporters include representatives of both major parties, where variations on the specific details are introduced in order to satisfy one or another special interest group. Though popularized by Republican Stephen Forbes in both his 1996 and 2000 presidential bids, a decade earlier Oakland Mayor Edmund G. (Jerry) Brown, Jr., a former Democratic governor of California, championed it with an equal lack of success. Over the years the flat tax concept has remained a durable issue for those candidates utilizing the Christopher Columbus approach to electioneering: just discover an issue and land on it.

My objection to the flat tax is its offer of tax simplification. For the taxpayer willing to understand and utilize the system, complexity is desirable, and the more, the better. Complexity, by its very nature, creates opportunities for creativeness--"loopholes," if you prefer. It also complicates the tax collector's ability, sometimes to the point that the entire process bogs down in a mass of self-contradictory rules and procedures. Ease of administration of a tax system normally results in maximum revenue to the collector, whereas complexity works in the taxpayer's interest. It is my belief that the sole hope for the citizen is a perpetuation of the presently existing labyrinth of tax laws. Only a system that provides an element of indecipherability will allow the knowledgeable taxpayer some maneuvering room.