Skip to comments.Some Good News on Tax Reform (if You're a Fan of the Flat Tax)
Posted on 04/19/2014 5:58:27 AM PDT by Kaslin
Im ecumenical on tax reform. Ill support any plan that rips up the internal revenue code and instead lowers tax rates, reduces double taxation, and cuts out distorting loopholes.
And as I explain in this interview, both the flat tax and national sales tax have a low tax rate. They also get rid of double taxation and they both wipe out the rats nest of deductions, credits, exclusions, preferences, and exemptions.
Dan Mitchell Commenting on the Obstacles to Tax Reform for Blaze TV
Youll notice, however, that I wasnt very optimistic in the interview about the possibility of replacing the IRS with a simple and fair tax system.
But perhaps Im being needlessly gloomy. New polling data from Reason-Rupe show that theres very strong support for reform. At least if you favor a flat tax.
This doesnt mean we can expect genuine tax reform tomorrow or the next day.
President Obama is viscerally committed to class-warfare tax policy, for instance, and special interest groups would vigorously resist if there was a real possibility (they would say threat) of scrapping the current tax code.
But it does suggest that tax reform at least in the form of a flat tax could happen if there was real leadership in Washington.
So maybe my fantasies will become reality!
And one of the best arguments for reform is that the internal revenue code is an unfair mess.
Consider how rich people are treated by the tax code. The system is so complicated that we cant tell whether theyre paying too much (because of high rates and pervasive double taxation) or paying too little (because of special preferences and tax shelters).
Regardless, we do know that they can afford lots of lobbyists, lawyers, and accountants. So even though they are far more likely to be audited, they have ample ability to defend themselves.
But the real lesson, as I explain in this CNBC interview, is that the right kind of tax reform would lead to a simple system that treats everyone fairly.
Dan Mitchell Debates Former Head of IRS on Tax Reform
Im also glad I used the opportunity to grouse about the IRS getting politicized and corrupted.
But I wish there had been more time in the interview so I could have pointed out that IRS data reveal that you get a lot more revenue from the rich when tax rates are more reasonable.
And I also wish I had seen the Reason-Rupe poll so I could have bragged that there was strong support for a flat tax.
Unfortunately, I wouldnt have been able to make the same claim about the national sales tax. I havent seen any recent public opinion data on the Fair Tax or other similar plans, but a poll from last year failed to find majority support for such a proposal.
And a Reason-Rupe poll from 2011 showed only 33 percent support for a national sales tax.
That wont stop me from defending the national sales tax. After all, it is based on the same principles as a flat tax.
But the polls do suggest (as do anecdotes from the campaign trail) that a flat tax is a more politically viable option for reformers.
The moral of the story is that it makes more sense to push for the flat tax. After all, if I have an easy route and a hard route to get to the same destination, why make life more difficult?
Though the ultimate libertarian fantasy is shrinking government back to what the Founding Fathers had in mind. Then we wouldnt need any broad-based tax of any kind.
P.S. Heres my choice for the strangest-loophole award.
P.P.S. Since I shared a poll today with good news, I may as well link to a tax poll that left me somewhat depressed.
P.P.P.S. Lets end with some IRS humor.
We need simple taxes, but to combine a flat tax with that need, will return us to non-simple taxes.
So, we’re likely to continue with progressive tax rates ... but at least, we might do that with simple tax forms.
Guess who has a flat tax........RUSSIA!!
This is the same issue brought up every year at this time by those who actually pay an income tax. Since they currently are just slightly more than 50% of the income earners, they are barely in the majority but in any group there are always the do gooders who were sold the notion about the “progressive income tax” being beneficial.
IMO, the flat tax is not a bad idea, even an income tax with one rate is not. What should be done would be to eliminate the social security and medicare taxes and fund those from general revenues, something that is going to happen anyway as those systems are going bankrupt day by day now. Remove those in house “bonds” from the national debt too reducing the budget deficit a tad as the interest we pay on the intergovernment balances of these bonds is a shell transaction. Everyone pays is my motto.
Step one is to get the people to buy into the flat tax.
Step two is to convince them that the income tax is immoral and counterproductive and needs to be replaced with a consumption tax.
Whenever I point out that the progressive income tax is the second plank of the Communist Manifesto people are surprised that we would have such a thing.
We need a flat tax with one low rate for everyone, and no deductions for anything.
Just one low rate, and one personal exemption equal to the federal poverty rate. (about $13,000)
The truly poor would pay nothing, and everyone else would pay the same low rate on everything over poverty level.
Young/old rich/poor married/single 10 kids/none at all, the same personal exemption and the same low rate.
The whole thing would fit on a postcard.
The poor Schlub making $18,000 a year wouldn’t get screwed, most of his income would be untaxed. He would only be taxed on $6,000.
Nobody would have to worry about being bumped into a higher tax bracket, there would only be one, and that personal exemption would never go away.
And being successful would not be punished.
Send treats to the troops...
Great because you did it.
(An entirely free service)
It's still a tax on the sweat of your brow.
There's nothing right about that.
Many countries have, or are considering, a flat tax: http://en.wikipedia.org/wiki/Flat_tax and that is the way to go.