1. Where's Fig 1?
2. What's the long version got that this one doesn't?
3. I'm a little baffled by your description of the flat tax. You say "The
flat tax need not be flat. Workers could be taxed under multiple,
graduated rates, as under the personal income tax." I'm not quite sure I
understand. How would this differ from a graduated income tax? And how
could it be sold to anyone as a flat tax?
Michael
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The fig would be in a separate file that I failed up upload. Remind me what it is and I'll paint you a picture in words.
The long version surveys the pros and cons of consumption taxation. It's a hundred pp and not bathroom reading. Also not quite done.
Re: the flat tax, the hallmark of the flat tax, its name notwithstanding, is the ingenious definition of the tax base. The flat tax splits the consumption tax base so that workers are taxed only on wages and pension distributions (the infamous postcard), and firms are taxed on value-added excluding wages taxed to the worker (mainly profits and fringe benefits, minus expenditures for plant and equipment).
This a clever way to have an equivalent of a value-added tax that includes a standard deduction and exemptions for families against their labor income. In other words, the base of the flat tax and VAT are identical, but under the flat tax part of the base is taxed to the worker.
There is no reason why either the worker, the firm, or both could not be taxed at graduated rates or different rates under a flat tax.
There are mucho problems with the flat tax which many have written about, but the incompatibility of its design with progressivity is not one of them. The statement of many that the flat tax does not tax capital or "the rich" is bunk. It is true that the legislative proposals from the likes of Dick Armey would have made Federal taxes much less progressive. Jerry Brown's flat tax was much different than the standard version. In Brown's case the single rate was the main feature, though it was basically superficial. I tried to get JB onto a more progressive design but he was having too much fun with the treacle that Arthur Laffer cobbled together for him. His main achievement was to elevate the old Hall-Rabushka design and expose it to intense discussion and criticism which is pretty much over.
The old design died when Forbes used it to run against Dole in the '96 primaries, and out of fear of Forbes the Repug establishment strangled their favorite baby in its crib. Since then they have done nothing but make the system much more complicated then it was in 1993.
mbs