Tuesday, July 14, 2015

The Flat Tax Revisited

By Laurence M. Vance

Every four years, during the presidential election season, Republican candidates criticize the abuses of the IRS and the complexity of the tax code. This time is no different. Sometimes Republicans introduce their own tax reform plans. This year Senators Marco Rubio and Mike Lee have their plan and Senator Rand Paul has his. With the large number of Republican candidates running for president this time, there will certainly be others.
Republicans invariably talk about the need to shift to a flat tax that is both “fair” and “simple,” yet still raises enough money for the federal government. The tax rates are hardly ever mentioned. Rarely is the amount of money the federal government actually spends ever pointed out. And the fact that taxation is institutionalized government theft is certainly never stated.

he idea of a flat tax has been around a long time. Economist Milton Friedman—one of the fathers of the withholding tax—proposed a flat tax back in 1962. The 1981 Wall Street Journal article by Hoover Institution economists Robert Hall and Alvin Rabushka called “A Proposal to Simplify Our Tax System” grew into a book in 1985 titled The Flat Tax. The idea of a flat tax gained national prominence when House Majority Leader Dick Armey promoted it after the Republicans gained control of Congress during the Clinton administration. Switching to a flat tax sometimes had bipartisan support in Congress. Hall and Rabushka issued new editions of their book in 1995 and 2007. Former Republican presidential candidate Steve Forbes published Flat Tax Revolution in 2005. Various think tanks and tax reform organizations have come out with some form of a flat tax plan to reform the tax code.

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  1. As much as I respect Mr. Vance, I don't see any major changes or repeals, Flat or otherwise. The current tax structure gives the bureaucrats and politicians so much power, and their coffers so much loot that they will never willingly give it up. That goes for Democrats and Republicans. I can't see the parasites letting up until the host actually dies. Of course, the parasites never seem to realize that when the host dies, the parasites die too.

  2. Although I agree with Mr. Vance on the nature of taxation, he is wrong on Rand Paul's plan on one of his four points, as far as I understand Paul's plan. From what I know of it, it isn't revenue neutral. In order to balance the tax cuts he proposes cutting numerous government agencies. Now I'm not a sycophant here for Paul, but unless I'm mistaken, he's the only one not touting a revenue neutral flat tax. I'd love to see anarchocapitalism. But absent that, I'll take anything that reduces the tax burden on me and most others. As Rothbard pointed out: It doesn't matter how they're taking your money, what matters is how much. Income or consumption or both, doesn't matter; if it is less theft than I'll be happy about it. Hopefully in my lifetime we'll abolish taxation altogether. But for now, I'll be pleased with any reduction at all, flat or not.