Monday, May 18, 2015

The Flat Tax, Again

Today's Washington Post's headline reads: Rand Paul the latest GOP presidential contender to catch flat-tax fever.  Now, Rand Paul is no moron, and I like a lot of what he stands for, but the Flat Tax can best be characterized as …  a bad idea (in place of "a bad idea," I had originally used the highly expressive term "moronic" before; but in deference to a friendly reader, I have changed my language, if not my judgment).
I have an essay in my book, To My Countrymen, which is titled Flat Tax, Fair Tax (pp. 110-113) and it analyzes both tax schemes and finds them … wanting.  The conclusions are simple to state: 1) however much these two tax schemes might reduce taxes, the middle-class ends up paying a bigger slice of the total tax pie than they did before, and the wealthy end up paying a smaller slice of the total tax pie than they did before.  Terrific, just what we need, another re-distribution of wealth … UP!  Then, 2) the more that tax rates and tax collections are reduced, the bigger the deficit (and the National Debt) that results.

Let me quote from the Washington Post article:
"He (Rand Paul) is going to have a very low rate flat tax that is going to be the lowest rate flat tax that I think anyone is going to propose," Moore said. "We're looking at a rate as low as 14, 15, 16 percent."
Terrific!  Everyone loves a tax cut, don’t they?  That is what they are counting on: American thoughtlessness.  The lower the tax rate, the less revenue will be generated, the bigger the deficit that results, the more the Debt grows.  THAT is a problem.
Moore said it will be a "huge job creator" and will amount to a tax cut for working and middle-class people.
Right!  We have tried tax cuts creating jobs before and I admit it sounds good but it has never worked in practice, tax cuts do NOT create jobs!  This is the crux of their argument: that lower taxes create jobs and bring in more revenue because all that money, if freed up, grows the economy.  The only problem is: it is not true.

And however much it might be a tax cut for working and middle class people, there is no way to design a Flat Tax that will not benefit the wealthy even more than working and middle-class people, and that will not create a bigger National Debt that will be theirs to pay back.