Tuesday, September 07, 2004

A flat tax is a bad idea.

Why you're right:

1. It forces a choice between higher deficits or an increased burden for the middle class. Under the current progressive system, the rich pay a larger share of their income. To make up that difference the government must either: 1) shift a significant portion of the tax burden to the middle class or 2) borrow money to make up the difference. (EPI)

Why they're wrong:

1. There are other ways to simplify the tax code. It is complex because of years of adding loopholes and exemptions. The tax code is not complex because it's progressive. If you eliminated exemptions and loopholes, a progressive tax code could be implemented on a postcard. (EPI)

2. It doesn't encourage work. Empirical research shows "the labor supply of full-time, primary earners in families to be unaffected by tax rates." Most workers have their hours set by their managers – they aren't able to change their work habits based on their tax rate. (EPI)

A better idea:

Eliminate loopholes and exceptions that add complexity and allow some to avoid paying their fair share of taxes – but keep the graduated tax rate.