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I know quite a few people who support the flat tax, and those folks all have one thing in common: They think a flat tax will make their own taxes lower. That's why the flat tax is bullshit. It can never live up to its imagined promise of lowering taxes for every individual while keeping tax revenues neutral or higher.

I think most people like the idea of a simpler tax code. No argument there. But I've never met a person who would volunteer to pay higher taxes in exchange for simplicity.

The flat tax idea is a brilliant bit of psychological class warfare. At least I hope that's what it is. I'd hate to think the people in the highest tax brackets, i.e. my peeps, are as dumb as the people they hope to screw with promises of unicorns and flat taxes.

The flat tax diversion is a deliciously cynical way to maintain the status quo while appearing to be in favor of change.  The diversion works because the middle class has been duped by the media into thinking high income people pay a lower tax rate than the general public, so maybe a flat tax will set things right. That's the power of anecdotes. If you hear a few stories about Warren Buffett paying a lower tax rate than his secretary, you assume your dentist is beating the system too. He probably isn't.

Another brilliant aspect of the flat tax argument is that it's simple to explain, and our brains are wired to perceive simple solutions as better than complicated ones. In reality, the simplest solution is usually the one that comes from someone who is either trying to screw you or who isn't capable of understanding the full situation.

The flat tax diversion is weasel-clever because it shines a light on the absurd "fairness" argument coming from the folks who want to raise taxes on the rich. Fairness is an illusion our parents taught us as kids to make us stop fighting with our siblings over the appropriate division of candy. Fairness isn't an objective quality of the real world. The reality is that the rich willingly pay higher taxes for the same reason that the British monarchy willingly converted from a dictator model to a symbolic role: If you want to avoid being beheaded, sometimes you need to be flexible.

Personally, I'm quite comfortable paying taxes at the highest rate. It's like paying protection money to the Mafia, and I mean that in the best possible way. High taxes reduce the odds that jealous mobs will kill me for succeeding in my chosen field. Oh, and my taxes are also helping fund national defense, education, social program, and other good stuff. That's a win-win. But please don't insult me with arguments of fairness. Save the fairy tales for your kids.

I know some of you will leave comments about your own fairy tales of Laffer Curve economics, in which lower tax rates stimulate the economy and fill the treasury with free money. And then someone will point out that economic growth in the Unites States has often coincided with higher tax rates. Can we agree that the Laffer Curve has been debunked everywhere but on Fox News?

 
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Oct 20, 2011
The Laffer curve is fine and "true" as far as it goes.

I think what most people (and especially Fox News) ignore about it is that cutting taxes doesn't result in more tax revenue if you're *already* on the low side of the curve. Which the US most definitely is.

(For the record, I'm one of those kooky people who would support paying higher taxes if the money were better utilized by a more efficient government. However, since we live in Dilbert's world, I acknowledge that essentially does mean "I do not support paying higher taxes.")
 
 
+3 Rank Up Rank Down
Oct 20, 2011
What's interesting to me in the argument is the two extremes with no recognition of a middle ground that might be palatable to everyone (or not). Right now we have a progressive bracket system full of loopholes and exemptions that make it very hard to figure out what anyone pays...it just feels rigged even in those cases when it isn't.

Proponents for a flat tax want to get rid of those lookholes and charge everyone one rate with little or no exemptions. Sounds fair but, as you suggest, may be politically unsustainable because you get the low income people arguing that they effectively pay a higher rate because other, non-income taxes (i.e. payroll taxes and local taxes) hit them harder.

There's nothing that says we can't maintain a progressive bracket structure and just eliminate all the loopholes and excemptions (hopefully with those bracket rates being lower then they are now!). Little favoritism, simplier to calculate and collect (theorectically), and the main voter blocks "FEEL" better about it because they still get to stick it to the rich guys.

Of course, that system would never get past the political-types who depend on those wealthy donors to fund their campaigns, but it would probably do well in polling.
 
 
-2 Rank Up Rank Down
Oct 20, 2011
I have enough dumb friends who support the "flat tax" or "fair tax" or "9-9-9" plans, and somehow, making these exact points never seems to convince them of how stupid those things really are. Raising taxes on the poor while lowering them on the rich is just going to make things harder for most of the country and lead to more, not less, civil unrest. I'll be sharing your post on my own networks, and apologies for making myself an author by relocation, but I agreed with every single thing you said (not normal for your blog, I assure you) and want to see it as widely distributed as possible.
 
 
 
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