Well, it’s tax time again. As I try to make some sense of the seemingly bottomless pile of papers required to balance my account with the federal government, it strikes me that now, more than ever, is the perfect time to implement a flat tax.
Let’s face it. Our current tax system is broken. It is extremely complicated, with nearly 900 different tax forms in all. It is easily manipulated by those who know how to do so in order to take advantage of the bureaucratic mess and inefficiency that is the tax code. And it stifles growth by penalizing productive behavior, savings and investment. Everyone hates it, and everyone complains about it. It is a system in desperate need of reform, or better yet replacement.
A flat tax is the perfect alternative to what we have today. Implementing a flat tax system would be simple and, more importantly, fair to American taxpayers. Establishing a single, low rate, regardless of income, would treat all taxpayers fairly and equally. If the rate were, for example, 20 percent, then all income would be taxed at 20 cents on the dollar one time and one time only: when it was earned. I don’t know what the actual rate should be, but many of the former Soviet republics have adopted flat taxes that range anywhere from just over 10 percent to over 30 percent. Right now, though, it is not the number, but the principle, that is important.
If taxpayer A has 50 times more taxable income than taxpayer B, then taxpayer A pays 50 times more in taxes. What could be fairer than that? Those who argue that the rich should be required to pay a greater percentage in taxes ignore the economic realities of penalizing some of the most productive contributors to the nation’s wealth.
Now, I know that some will argue that those at the bottom of the income range suffer more by paying x-percent than those at the top of the income range. This may be true, but it is fundamentally fair. Taxes are the cost of citizenship in a country where people demand services like police and fire protection, roads to drive on, and schools for their children. The costs associated with these citizen demands should be borne equally, with each taxpayer remitting the same percentage of their pay to the government.
A flat tax would also eliminate deductions, credits, exemptions, and all the other items that make the current code so difficult to understand. By simply taxing citizens a single rate on what they earn, there is no need for tax provisions that attempt to dictate behavior. Many flat tax advocates include a set deduction based on family size. Low-income families that have taxable incomes less than the deduction would pay no taxes. I disagree with this approach, as stated before, because I believe that anyone who takes advantage of government services should contribute to the costs associated with those services.
A flat tax would also put an end to the practice of double taxation. By taxing income only once, at the time it is earned, there is no need for the imposition of taxes like the estate tax (or death tax, if you prefer). If the money earned has already been taxed once, why should it be taxed again? Doing so penalizes those who engage in wealth accumulation by saving and investing.
Finally, a flat tax would treat all businesses equally. Corporations or companies would pay taxes to the U.S. government on all income earned within the United States, minus necessary expenses such as labor and investment. Simplifying the tax system for businesses would make the United States more attractive to corporations from around the world.
There is no disputing that our current tax system is in desperate need of help. Implementing a flat tax would simplify the process of collecting revenues for the federal government, eliminate unfair tax practices, and encourage business operations within the United States. But perhaps most importantly, it would level the playing field for all Americans by treating all taxpayers equally and encouraging savings and investment without fear of penalty. The time for a flat tax has come, before our current system drags us deeper into the abyss of government inefficiency and waste.