In July of 1996, Reason magazine featured a number of articles relating to federal tax code. Naturally, a proposed “Flat Tax” was discussed. I was motivated to write to Reason. Here is what they published in the November issue Letters To The Editor.
Any tax with a rate of zero percent for some people and 15 or 20 percent for others can hardly be called “flat.” Unfortunately, any flat tax we may end up with will be “flat” in name only. And that is a part of a much larger problem.
For years politicians have been convincing Americans that a) We can have it all and b) Some one else will pay for it. For some people this may be true. For many others, however, it may be perceived to be true. The perception that they are getting a free ride at the expense of “the rich” or “big business” is sufficient motivation for people to vote themselves more benefits. Too many Americans don’t realize how much the tax burden is costing them.
I agree with Grover Norquist that taxes should be “visible, painful, and applied equally to all taxpayers.” Bruce Bartlett points out that under a flat income tax, “A family of four would have to earn $25,000 per year before it paid any income tax” and that “there is no possibility that the Congress would enact a sales tax without doing something to reduce the burden on the poor.” Yet, to include a zero percent rate (or a rebate mechanism in the case of a sales tax) for some people is to leave in place the incentive for these people to continue voting for higher taxes.
Any proposal, if it is to actually reduce the size of government, must reduce the number of people who perceive themselves to be receiving a net benefit and increase in numbers those of us who feel we carry more than our share of the burden. This will happen only if tax policy and tax rates apply equally to everyone.