Flat Tax?

boddhisatva kbevans at panix.com
Sat Jan 23 12:44:06 PST 1999


To whom,

It seems to me that the taxation no-brainer for the left is simply to remove the 68,000 dollar income cap on Social Security taxes. That is an immense regressivity just sitting there like a duck in a shooting gallery. One can use the RepCon rhetoric that Social Security is merely meant as a "supplemental" and "emergency" pension plan and throw it right back in their faces. If Social Security is everyone's safety net and not everyone's pension then everyone should pay the same percentage of their income (or ideally a progressively larger portion of their income) for that safety net. Even if the rate for Social Security taxes were flat past 68 grand, that would still be progress - progressive progress.

Once that battle is through, worry about exemptions and deductions before you worry about the shape of the rate curve. It seems to me that the deduction hodgepodge (and here I'm talking about the whole scheme of deductions that fill the thousands of pages of the Internal Revenue Code, not just income tax deductions) is neutral to bad for working people, taken all around. If out of the "flat tax" Ludditism there comes a serious effort to reform the tax code and eliminate deductions on all ends of the income scale, that would be progress also.

A "flat tax" for businesses - one that dealt with the fact that businesses vary in their capital and labor needs and their profit margins - would really be an achievement. How to tax Microsoft and a chain of grocery stores fairly without deductions is a real challenge. The question is how you keep businesses reporting and accounting for their income and paying taxes (I say this because some wahoos argue that business taxes should be eliminated because the owners of the business are taxed on their gains - the dreaded "double taxation" of the bourgeoisie for which we all weep) while not discouraging businesses of any particular kind. The present system of taxing only profit encourages business to hide their earnings in bogus "investment" and throw all sorts of claims of depreciation at the I.R.S.. Everybody wants to earn like Microsoft in reality and look like a grocery store chain on paper. Some way, perhaps, to tax on both income and revenue in a reasonable ration might be invented. Forget the V.A.T.. The "flat tax" on business would not be simplistic, but it could be fairly simple if well thought out. For example, instead of deductions for depreciation, one could allow businesses to form the equivalent or IRA's for future capital investment. That would substitute a deduction based on a theoretical plan to re-invest for savings on an actual plan to re-invest.

peace



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