is flat fair

During the 90’s Republican Primaries, Steve Forbes brought forth for debate the idea of a flat tax. He was able to bring this idea out to the public in plain English, allowing the average American to see the huge advantages this idea could provide for America. The worst problem in his plan was while the average American could now understand the advantages of a flat tax, the average American doesn’t vote. Only a small percentage of the voteable American public does take advantage of this privledge.

As we Americans watch the political debate heat up, many buzz words are thrown at us in either a good or bad way. One concept has received a great deal of unfounded negative press—the possibility of a flat tax rate replacing our current progressive tax rate. One of the odd points of this negativity towards the flat tax is 75% of the public dislike the idea before they understand the specific goals and means to accomplish these goals with a flat tax, but after the same groups hear the true details of a flat tax then just over 86% approve of it. The main reason for this great of a change in heart is all the negative press and fear of change always makes changing status quo difficult.

The Forbe’s flat tax plan is still one of the more popular flat tax ideas even now, but the flat tax is no new idea. The flat tax has been suggested in American politics for over twenty years and a couple of other countries have already instituted such changes and reaped the benefits thereof. Congress studied the flat tax concept in the spring of 1995, and found that a flat tax would improve raising federal funds and the economy. The deficiency of this study stemmed from the congress’s unwillingness to put hard figures in the assumptions of the study and this has allowed journalists and politicians to input their own assumptions that do not adhere to the goals of the new tax system. Generally in the past, lowing income taxes has increased federal revenues whereas the opposite is also true—raising taxes lowers federal revenues after the first year. The flat tax would greatly decrease the federal tax load on most, if not all, taxpayers and would spur the economy into a prolonged high growth cycle.

One common misconception of our progressive tax system is that the “rich” pay more, i.e. their fair share of the tax burden. The reality is the “rich” can afford to pay lawyers and accountants to find every feasible loop hole and tax shelter and even lobby for more tax loop holes, and instead of paying their assigned 49 ?% of their income they pay an average income tax as low as 5%. the lower income brackets pay anywhere from 0% to 17% and the middle income brackets pay on average from the 22% to 36% range. The imbalance in the progressive tax system is that the middle income bracket are saddled with the highest rate because they are not able to take advantage of the multitude of loop holes. This effect has also been called the laffer curve. The flat tax answers this because with a flat rate of 17%, with a better standard deduction and allowing only 2 types of deductions, home mortgage and charity. The effective rate for the wage classes would be; the poor would have an effective rate of 0%, the middle class would have an effective rate of 7%-14%, and the upper class would have an effective rate of 16%-17%. Also with retirement income, interest income, and dividend income becoming exempt, which are almost the entirety of senior citizen income, we will be giving the most needy section of our society a well deserved break and a brighter outlook for their tomorrows.

There are two clear immediate benefits to a flat tax system. The I.R.S. could go from its current multi-billion dollar budget and 300,000 agents to less that 1% of it’s current size—giving a nice savings towards balancing the federal budget while protecting many of the social programs’ growth that have been put into jeopardy such as; Education, Welfare, Social Security, and Medicare. The new tax code would be very simple for the tax payers and law makers—the tax law would go from a set of papers well over a foot thick, to a simple code of about 100 pages, well less than an half inch thick.

The long-term effect of changing our progressive tax code for a flat tax system will give our economy a large boost in growth—we currently only have 2-3% growth, but that would jump to 10% growth per year without setting off inflation. The largest boon for growth will be the freeing of large amounts of capital from their current tax shelters that will then be available for investment or venture capital. The additional capital infused into the market will be a paramount job creation tool and average wage increasment. The largest benefit for our middle class is by allowing them to keep more of their own money and have a much better chance for wage increases will raise their standard of living. Please let your congressional leaders know you want a better America, vote and have them vote for a flat tax system.

I just hope soon another politition will have the guts to try to once again educate the public on the benefits of the flat tax and remove the burdon of our over sized government from the backs of the porrest and hard working Americans and allow a nice fail even load on everyone.