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Question to Ricochet: Is this a brilliant idea or what?
In Southern California for the Pacific Research Institute’s annual Baroness Margaret Thatcher Orange County Dinner last night, I had lunch shortly after landing with a veteran of political communications in this state.
Over our meal, he began to go on in the manner all of us go on about the cluelessness of Republicans in Washington. “In the course of one month,” he said, “Bengazi, the IRS scandal, and the tapping of the Associated Press all broke — and the GOP couldn’t do a thing with it.” I just listened. I thought he was being a bit harsh, but we all need to get these frustrations out now and again.
Then he said something that made me sit up, take note and, now, write this post.
“The GOP,” he continued, “should come out for a flat tax and announce that, thanks to all the administrative savings from so vastly simplifying the tax code, we’ll lay off half the IRS. Get rid of all those agents they hired for Obamacare and many more. Americans hate the IRS. The complexity of the tax code is a big reason for the agency’s corruption. And you get a tax code that is friendly to economic growth to boot. Tie the two issues — stagnation and corruption — together.”
“What a brilliant reframing of the discussion,” I thought. “And where better to test it out than Ricochet.”
So here is my question: What do you think?
Published in General
Absolutely correct. A related distinction to be made by conservatives in the next election is that we are pro-market and not necessarily pro-business. The latter gives rise to crony capitalism great and small, while the former sustains liberty by ensuring that businesses succeed only so long as they provide the best deal for customers.
I like the flat tax for its inherent fairness and its efficiency, particularly if all deductions, including individual and personal exemptions, are replaced with a per person credit (i.e., taxes start from the first dollar, but there is a refundable credit that negates the tax burden for the poor). Doing the latter would allow for not just the replacement of deductions, but, if appropriately sized, the elimination of means-tested welfare benefits. The flat tax/refundable credit approach could get us to a situation where everyone has the same marginal tax rate (not the 100% or higher marginal tax rates when means-testing is factored in), the poor get something to help, and bloated government bureaucracy could be slashed.
FICA Social Security, and Medicare would be eliminated, replaced with an increased credit of $24K/yr for ALL people over 67.
However, the idea will not sell politically during an era where Wall St., with government backstopping, runs amok.
Solution: pair the flat tax and credit with a savings requirement for those making more than $100K, and that money gets drawn down first before people get the increased 67+ credit.
Lets be honest. Very few want a completely flat tax. Most would be delighted with a much simpler, lower one, with very few deductions. But the lobbying world will go to war on the idea.
Naive, but old, good idea.
Right on. Simplification, even if it isn’t a flat rate tax, you could still eliminate all deductions, keep the EITC, and drop the rates down to reasonable levels, while keeping it revenue neutral.
Brilliant idea. Get the idea out there NOW ….tax time. Perfect time to put it out there.
Think strategically; which party is more likely to pass a balanced budget? If that party finds themselves in power, it’s in their best interest to pass such a bill.
That’s not thinking strategically. At best, that’s willful blindness. The national debt doubled under the last Republican administration. The current administration is making that administration look like amateurs in the reckless spending category. But Republicans have controlled the House since 2010, where every spending bill must originate. What have they done with that power? Nothing except cut defense budgets so that the same money could be wasted elsewhere.
There’s only one party — the Incumbency Party. Its members do not care how much debt they incur, so long as they retain their positions of power. You want to do something strategic? Stop contributing to the problem by supporting incumbents, save the tiny handful who are actually trying to change the game in DC. You know who they are.
A marvelous idea– but where would you find a Republican member of Congress with the guts to propose it, let alone a sufficient number with the integrity to support it?
Great observations in #73.
Tax reform via fiddling with tax rates will always be seen politically as a zero-sum game. I don’t see it getting anywhere. In the end, those with money will pay taxes and those without money won’t.
Reducing overall taxation will require reducing government re-distribution of wealth (ie. massive entitlement reform). Gov’t regulations harm our economy as much or more than taxes do. They also necessitate an ever expanding bureaucracy for enforcement. We should go there first. Politically, no oxen gored (other than government oxen).
I have been a fan of the flat tax since Steve Forbes first started talking about it. I do not see how it could possibly be implemented with the armies of special interests and politicians who get their power from Govt. favours lined up actively or passively against it.
I support it
I’ve alway wondered why the idea of a flat tax wasn’t center stage in the Republican talking points. People tell me it’s naive, so I guess I am naive. It is simple. Most people agree (I mean in discussions that I’ve had personally) that it’s more just to just have everyone pay the same tax rate. I don’t win those arguments because those people then say that the Republicans want to cut taxes for the rich, they don’t just want to make it fair for everyone. Both sides have kind of complicated tax propositions, so a super-simple Republican plan would be great by me.
As for the IRS, I’m afraid of how this Lois Lerner thing will go. It’s completely justifiable to cut back the IRS after they’ve been caught going after conservative groups; so now the public will need to see proof, which hasn’t happened yet. Obama will have to be embarassed for saying there wasn’s a smidgeon of corruption. I’m afraid the whole idea of IRS wrong-doing will go the way of Benghazi. But I like the idea a lot!!
Two birds, one stone.
:-) I applaud the sentiment. But let’s remember the context. Getting Congress to pass ANY budget is a challenge. And OBTW, you can balance a budget by increasing taxes with greater political ease than by decreasing spending.
Think strategically; which party is more likely to pass a balanced budget? If that party finds themselves in power, it’s in their best interest to pass such a bill.
Increasing taxes won’t balance the budget, we’re on the negative side of the Laffer Curve.
As for the IRS, I’m afraid of how this Lois Lerner thing will go. … I’m afraid the whole idea of IRS wrong-doing will go the way of Benghazi. (Yes, it will becauseall Incumbents hate the TEA Party not just Democrat Incumbents.)
Please God yes.
Support the Fair Tax.
So difficult.
So difficult. ·0 minutes ago
I love the message. But how many low information voters recognize the symbols? Capitol building, probably. Caduceus and IRS eagle? Not so much. “K Street” — an insider or political junkie reference.
Great poster for the Base, but will it do the job nationwide?
Which is all garbage in the extreme. But that’s how they get re-elected. Strip them of this power and you’d find a much less invasive gov’t standing afterwards, and a much freer populace.
Which is why it will never, ever happen. ·9 minutes ago
Which is why, starting a hundred years ago, the stripping of the republic features for democratic features to our system is such a killer. It would be so much of a better world if far more of the power was held at the state level. Your governor and state legislator would have more money and power to work with, and YOU would have more money, wealth, and a better life.
It’s a campaign promise. You don’t have to actually follow through on it. ·in 6 minutes
John will be so disappointed (at least with respect to the crony capitalist segment).
The greatest benefit of a national sales tax, as I hinted above, is the Federal Government and Businesses at odds. A little antidote – when I used to have a telephone land line I would pay $12.00 for the service and $13.00+ for the fees attached to the land line (California). When I asked why I had to pay the fees I would be told, ” We don’t impose these fees, the government asks us to collect these.” A few years later when they had installed fiber they offered digital service which was not subject to government fees associated with copper land lines. They had learned to offer customers a better product without the government imposed fees and taxes. The moral is, since there are no lobbyists for private citizens but thousands upon thousands representing every major manufacturing association and the Chamber of Commerce there will no longer be a discussion about revenue vs. spending. With all the lobbyists pounding our representatives there will only be a spending problem. It will be far cheaper for associations to pay for lobbyists to pressure for a low National Sales tax than to lower their profit margin.
And PS to Don Tillman: John Woo is going to be a busy guy: http://www.joshuakennon.com/how-much-money-does-it-take-to-be-in-the-top-1-of-wealth-and-net-worth-in-the-united-states/
It’s a campaign promise. You don’t have to actually follow through on it.
The great thing it has going for it: It is the truth.
Current stagnation is a result corruption at the highest levels.
For a flat tax to be politically viable, the income threshold it applies to has to exclude these 47%, or it will seem like a raw deal to them.
While many people have a personal incentive to tactically collect as much as they can from government poverty programs, these same people would much more like to see their children succeed.
The slogan should be:
Remember when the Sheriff of Nottingham was the bad guy instead of the one responsible for making the correct investments to achieve utopia?
As others are noting, the power of taxation is the raw power of government. A multi-thousand page, multi-volume tax code isn’t ordered to liberty and justice for all. It’s a way to accrete power in DC.
It would take an army of George Washingtons to cede that power back to the people. I don’t see the Republicans comprising that army. And the Democrats don’t even pretend that’s their cause.
Unfortunately, it’s the nature of the beast. We didn’t have to read what was in the ACA to know what’s in it. It doesn’t matter what it says. It says whatever our government overlords say it says. See multiple arbitrary (lawless) and politically advantageous delays in the mandates, for instance.
The only virtuous reason to become a legislator at this point is to make it one’s goal to undo as much legislation, regulation, and taxation as possible. Show me that politician and he’s got my vote.
I don’t know enough about the flat tax to really comment. But the major problem in simplifying the tax code is that both parties have too much to gain from a more complex tax code– it’s easier to manipulate and twist into loop holes for big companies.
But I do like the idea of a simpler, more obvious taxation system. I think if the GOP just made people pay their taxes directly (instead of automatic withholding) people would start to really feel the effects of the government and would probably vote differently.
This flat tax, or sales tax idea would be wonderful, but it is a step too far – its revolutionary and I don’t think we are ready for it at this point. The problem is who’s ox gets gored. “Butters” is on to part of the problem: 47% don’t pay taxes now, but would under the proposals. That’s a lot of people! Add to that tax preparers, tax attorneys, tax accountants, tax departments, tax software companies. But here is the real problem: rent seekers, lobbyists, and politicians. What is that bee hive of activity in D.C. actually doing? I bet the majority of activity concerns tweaks to the tax code in return for contributions, played by both parties and even companies and industries we otherwise like. That is too many comfy people to throw out into the cold. And is it even possible to lay off IRS employees? I mean, you know, where they stop getting paid? Pie in the sky!
I have some related thoughts over on the Member Feed.
For a flat tax rate to work in a democratic polity, you would need a virtuous citizenry (ie, a citizenry immune from the temptation to immediately start reintroducing ‘progressive’ tax rates and exemptions in the interests of Equality and Fairness). Does this precondition exist in the United States? There is an (effectively) flat tax rate in Hong Kong, but that will last only for as long as democracy is not introduced in the former British colony.
We got health care “reform” not because people were uninsured, but because the gov’t was already 40-50% into the payment regime for medical services. Ultimately those who worship at the altar of statism want the gov’t to do more, not less.
Note that we did not get tort reform as a critical priority for Americans, even though that in itself is a massive cost driver in hospitals. Not a peep on that. So you run into the same problems here with a tax reform idea that you run into with tort reform ideas, in that you have highly monied interests who are working daily to make sure the status quo does not change. Tax attorneys do not want a flat tax.
That Congress and the President selectively work on issues that benefit them politically and personally tells you all you need to know about what’s gone horribly wrong. The whole enterprise needs a reboot, an overhaul, a cleansing.
But I don’t think we’re going to get it. We’re just going to continue to get it, in a rude and painful way, until we decide to fight back.