Answer: Two -- one to screw in the bulb and the other to complain about how needlessly complex the procedure is.
Just kidding. I actually agree with a lot of what Bill says about our current labyrinth of tax assessment and collection. And the image he provides of a single individual toiling away for 616,000 years to file the nation's taxes is a compelling one -- a kind of taxpaying Sisyphus, rolling a ball made of crumpled IRS forms uphill only to watch it come rolling inevitably down each April 15. Yikes. Yes, indeed, the current regime most certainly does "suck."
Which is precisely why I argue, along with Bill, that our system isn't just ripe for reform -- it's practically rotten for it. The flat tax he advocates, however, doesn't represent reform, unless by "reform" you mean "seismic shift of the tax burden from the wealthy to people who work for a living."
The flat tax comes in several flavors, but there's not a refund check's worth of difference between the plan described in the Freedom and Fairness Restoration Act (FFRA) that Bill recommends and the one proposed by Steve Forbes. As with the Forbes plan, the FFRA system offers a mercifully brief tax form. In fact, except for the requisite name-address-social security blocks, there are just 10 lines to complete. And yes, as per its billing, the form does fit on a post card.
Lines 1 and 6 are where the action is. The first asks for your Wages, Salary, and Pensions; the second for Taxable Wages, a much lower number you arrive at after subtracting allowances for personal and dependent deductions. Conspicuous by its absence: any mention of interest, dividends, or capital gains. That "capital" has already been taxed on the business side, goes the specious, supply-side reasoning. Why tax it again?
According to this tax-it-once logic, wages could arguably be exempt from taxation as well since they similarly represent already-taxed corporate capital doled out to workers (as opposed to shareholders) in the form of salaries or hourly pay. In many cases, after all, this year's wages were last year's fully taxed profits. Trouble is, we have to fund our government somehow, and so for taxation purposes, wages count as "income," not "capital." Convenient, no?
And so, as with the Forbes plan, the FFRA flat tax fails the fairness test. Wage earners continue to foot the bill while the wealthy-enough-not-to-work pay nothing, even as they presumably continue to use roads built by taxpayer dollars and are defended by a taxpayer-funded military.
Admittedly, there are elements of real reform in both the Forbes and FFRA flat taxes. Generous personal allowances would remove millions of low-wage-earners from the tax rolls, and the willingness to challenge sacrosanct deductions like that for mortgage interest payments would be courageous in the context of a tax reform plan that remained truly progressive.
But no amount of Orwellian appropriation of that word can hide the fact that there's nothing progressive about the flat tax. Hiding behind the rhetoric of "reform" and "simplification," the flat-taxers roll all the special favors and inconsistencies they purport to eliminate into one giant sweetheart deduction for the well-off.
Loophole, thy name is Investment Income.
This Week's Duel
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