Oct 21, 2011

A flat tax is not simpler than a progressive one

This man wants a flat tax.
Andrew Sullivan:
And my sympathy for it lies primarily in its simplicity. There is a direct relationship between the complexity of the tax code and corruption. The rich can afford accountants to keep their taxes low - shifting money and valuables around in myriad ways. The people doing that kind of work could actually be doing something productive.
I suppose a piece of paper with "9 percent" on it would be, literally speaking, slightly simpler than some kind of rate schedule—or, better yet, a mathematical formula with smoothly progressive character.  But what Sullivan's talking about is entirely a function of all the tax credits built into the system.  Yglesias:
Our tax code differs from what Perry is proposing in two ways. One is that the definition of taxable income is complicated because you can deduct home mortgage interest, non-reimbursed business expenses, a whole suite of small-bore tax credits, charitable contributions, and various other things. A second is that we have multiple tax brackets, such that a rich guy pays a higher marginal rate than a poor person. It’s changing the first that makes a tax code simpler. There’s nothing complicated about calculating how much you owe in taxes once you’ve calculated your taxable income. The second change just helps rich people pay less taxes.
It could be a one-step process. Income goes in, taxes come out. Making it flatter wouldn't change that at all.

1 comment:

  1. This message needs to reach more people. The tax code is thousands of pages of how to decide what taxable income is, the rates only hit the result at the end.

    If there was a simple "you pay tax on every dollar that receive", we could still have a progressive tax system likely with lower rates (as more dollars would be taxed). However, it would effectively end the accounting industry which would put hundreds of thousands of people out of work :(