A doleful bit of history: For various reasons, the so-called flat tax tends to be a comically awful idea. It also tends to be a scam—an attempt to lower the tax burden on upper-end earners under the cover of darkness.
The gorilla dust tends to be general when the old “flat tax” is dragged out.
In today’s Washington Post, Jia Lynn Yang details the political problems with flat tax proposals. Yang’s nugget statement: “The problem that many [flat tax] plans run into is that people want to tear up the current tax code until they learn they might pay more taxes in the new one.”
She fails to mention another basic political problem—the flat tax is easy to lie about. At least, that was the case in 1996, when Bob Dole—the press corps’ official “high character” candidate—lied his keister off in New Hampshire about Steve Forbes’ flat tax proposal.
Long story short: Forbes had proposed a 17 percent “flat tax” with a $36,000 tax exemption for a family of four. If a family of four earned $36,000 or less, it would owe no federal income taxes. It would only pay that 17 percent on income above that figure.
In New Hampshire, Forbes soared to the top of the pack. Candidate Dole fought back.
The Dole campaign aired a TV ad featuring New Hampshire Governor Merrill. Using a study which hadn’t factored in that $36,000 exemption, Merrill told voters that, under Forbes’ plan, the average family in New Hampshire would pay $2000 more.
Eventually, everyone in the political world came to realize that the ad was utterly bogus—a lie. But the voters themselves were much less clear, and the Dole campaign kept running the ad. Here’s Howard Fineman’s capsule summary in Newsweek:
FINEMAN (2/19/96): [A]n acrid odor rises from the campaign trail…If anything, Fineman was being polite, and very credulous, about those internal deliberations. It may be he was being conned, or was agreeing to be conned. If memory serves, the Dole camp even pulled the old “we tried to cancel the ad, but everyone at the TV station had gone home for the weekend” trick at one crucial point.
The Dole campaign aired an ad featuring its most important New Hampshire ally, Gov. Steve Merrill. In the spot, the governor says Forbes's flat tax would cost the "typical" New Hampshire family $2,000 more per year in federal taxes. The ad was effective—and wrong. It was based on a skimpy study by New Hampshire real-estate brokers who oppose the flat tax. Once Forbes assailed the spot, Newsweek has learned, Dole considered pulling it. But Merrill and campaign manager Scott Reed, who had by then realized the ad was flawed, argued to keep it on. To concede error could be fatal, they said. And Forbes, they contended, had no credibility on accuracy. Dole went along.
Earlier, Forbes had been pulling away in New Hampshire. He seemed to be on his way to a major upset. This ad was widely credited with dragging him down. Buchanan won the state, but Dole came in a close second.
It would be much harder to pull this stunt now, although the press discussion of Cain's tax plan has been very dumb in the past five days. But this history remains quite striking. Did we mention the fact that Dole was the press corps’ “high character” candidate, the guy the voters might want to select as opposed to the big liar Clinton?
Three years later, these idiots got started on big liar Gore. The entire liberal world just sat there and let them do it. As a group, we just aren't smart at all. And our "leaders" are very dishonest.
Back to 1996: In his ludicrous new memoir, Jim Lehrer has an astounding account of his approach to the 1996 Clinton-Dole debates. We’ll post on that subject some day before long. We never realized was a complete chia pet Lehrer is until we read that book.
For our money, his account of the 1996 debates is the most ridiculous part. Gennifer Flowers! Good lord...
Another myth about the flat tax is that it represents a major simplificaion of the tax code. Anyone who prepares his/her own tax return is not likely to believe this myth.ReplyDelete
By the time one finally arrives at one's taxable income, it's trivial to figure the actual tax, even if your doing it by hand. There's one subtraction, one multiplcation, and one addition. With a flatt tax, there would still be one subtraction, one multiplcation, and one addition.
The complexity of the tax code is in the zillions of details and special treatments for different types of income and different types of deductions, etc. And, for corporate income tax, the same is true, except that there's much, much more complexity to dealing with various types of income and various types of deductions.
David, the problem with the flat tax is that it is highly regressive. I'm sorry I have to use such big words, but I can't express it more simply.ReplyDelete
I don't know the particulars of the Cain plan but I know as a small business owner that dealing with the various levels of bureaucracy in employing just one person other than myself means that I have to employ a professional accountant. I could try to do it myself, but I run the risk of making a mistake and facing various levels of government coming down upon me and making things even worse.ReplyDelete
On top of paying the expense of an accountant I have to pay workers comp, my share of payroll taxes, and even order an up to date labor law poster every year. This means more money out of my pocket and much worse: more stress and anxiety. The money out of my pocket (I live cheap, I have to!) isn't nearly as bad as the shadow of regulation hanging over me. I'd rather pay a thousand dollars more in taxes than have to worry about all the bullshit I do in our current system.
gravymeister, to say the flat tax doesn't appreciably simplify the tax calculation is not to discuss it's progressivity. Your point doesn't contradict mine.ReplyDelete
Anyhow, a flat tax may be less progressive than the current system (depending on the percentage used), but by definition it is not regressive. "Regressive" means that the poor pay the same (or higher) percentage of income as the rich. However, with a flat tax, the richer one is, the higher percentage one pays. The reason is the big exemption at the bottom.
Consider the example above: a tax of 17% on income exceeding $36,000. If a family earns $36,000, they pay a tax of $0, which is 0% of imcome. If they earn $50,000, they pay $2380 (17% of $14,000), which is 4.75% of income. If they earn $100,000, they pay a tax of $10,880 (17% of $64,000), which is 10.8% of income. And so forth. The higher the income, the higher the tax is as a percentage of income.
gravymeister, I hope you didn't make the mistake of thinking that under Dole's proposal, each family of four would pay 17% of total taxable income. That's the very error that Bob Somerby was noting.
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