The Tax Cut Catastrophists--3: Clarifying the Effects of a Flat Tax on Low Incomes

In reply to my comments in support of a flat tax—which I posted under the New Jersey Star-Ledger editorial Trump, Cruz and Rubio tax plans are indecent proposals—correspondent Baffled objected that low income folks would be hit particularly hard by a flat tax because it would eat into spending on their basic necessities, which wouldn’t be the case with wealthier people. So I posted this clarification:

For the record, I favor a flat tax with a healthy personal exemption, but no other deductions.

Steve Forbes laid out a nice plan in his book "Flat Tax Revolution." In brief, there would be one rate of 17% with no deductions after a single generous personal exemption for every taxpayer and every dependent. In Forbes’s plan, the hypothetical "family of 4" would pay no income tax on about the first $46,000 (+/-) of income, and then 17% on every additional dollar of income. Some simple calculations reveal that a family of four with annual earnings of . . .

• $50,000 would pay $680.00 on an effective tax rate of 1.4%
• $100,000 would pay $9180.00 or 9.2%
• $150,000 would pay $17,680 or 11.8%
• $300,000 would pay $43,180 or 14.4%
• $1,000,000 would pay $162,180 or 16.2%.

In other words, the millionaire pays 238 times as much as the lower income family in dollar terms, and 11 times as much in percentage terms.

We could debate the rate and the size of the personal exemption and the tax rate. But the gist is that the new tax structure should be revenue neutral, not an excuse to sneak in a tax increase (which should be greatly reduced, along with spending).

But there’s no doubt about what a flat tax would accomplish:

• It's [justly] progressive; the more you make the more you pay in both dollar and percentage terms.
• It's fair; every dollar of taxable income is treated the same--i.e., no income discrimination.
• It's pro-growth; economic success is not penalized by higher rates.
• It would reduce both the incentive and opportunity to cheat on taxes.
• We could eliminate the IRS as we know it, saving billions in government spending and tens of billions in private citizens’ tax preparation fees.
• By eliminating the IRS, we would eliminate a chance of backdoor government censorship.

We could, in short, take a bad institution—the income tax—and make it a lot less bad.

-------------------------------------------

Some correspondents objected that this flat tax plan would eliminate the deductions for state income and local property taxes, resulting in income being taxed twice. This is true. But adding these deductions would likely raise the federal tax rate, resulting in residents in states with no income tax and/or lower property taxes facing higher federal taxes, in effect subsidizing higher tax states. Plus, allowing state tax deductions from the federal returns opens the door to demands from other groups for their favorite write-offs, defeating one virtue of the flat tax. On the other hand, a federal flat tax could be an impetus for high tax states to reign in their overspending, and cut taxes.

That said, I guess we could debate the propriety of allowing state and local tax deductions. In any event, the main purpose of a flat tax is fairness—or, to be more precise, less unfairness, since I believe a general tax on income is a tax on individuals’ livelihoods that empowers politicians to determine what to do with it, making it fundamentally immoral. That aside, there should be a single rate for all taxable income so that all income is treated the same without discrimination. (As to the mortgage interest deduction, that should be done away with. It’s bad economic policy.)

Related Reading:

In the Spirit of “Compromise”, How About a Flat Tax?

Rather than Repeat the Mistakes of 1986, How About a Flat Tax?

Toward Less-Unfair Corporate Taxes

A ‘Liberal’ Makes the Case for a Flat Tax—Sort Of

Hate the IRS? Then don't complain when you need it, and you will.

That’s the title of a New Jersey Star-Ledger editorial earlier this year. The Star-Ledger is a “liberal”—i.e., Left-leaning—newspaper. It wouldn’t be the sort of place you’d find an argument for a simple flat income tax. And although the Star-Ledger didn’t actually call for a flat tax, that, in effect, is what it did in its complaint about our “underfunded” Internal Revenue Service.

The Star-Ledger complains about the agency’s incompetence, including of its chairwoman Lois Lerner, its terrible “customer” service, and the “laughable bureaucracy” that “harassed political groups, . . . overspent on conferences, and . . . never updated their 1970s technology when times were flush.” Worst of all, in the Star-Ledger’s view, is that lack of operating funds might result in under-taxing Americans:

The IRS, however, is responsible for collecting the revenue, and now that it has been neutered, there's a risk that some of the $3 trillion they expected to collect this year might go unaccounted for. Right now, the tax gap is roughly $385 billion, and it's likely to grow in direct disproportion to the agency contracting. Your government at work, though not really.

All of this could be fixed, according to the Star-Ledger, if only Congress would increase the IRS’s budget well above its current $11 billion price tag.

That’s not what I got out of this editorial’s litany of IRS incompetence and abuse.

I left these comments:

I’m going to save this editorial. It’s a convincing argument for a simple flat tax.

Steve Forbes laid out a nice plan in his book "Flat Tax Revolution." In brief, there would be one rate of 17% with no deductions after a single generous personal exemption for every taxpayer and every dependent. In Forbes’s plan, the hypothetical "family of 4" would pay no income tax on about the first $46,000 of income, and then 17% on every additional dollar of income. Some simple calculations reveal that a family of four with annual earnings of . . .

• $50,000 would pay $680.00 on an effective tax rate of 1.4%
• $100,000 would pay $9180.00 or 9.2%
• $150,000 would pay $17,680 or 11.8%
• $300,000 would pay $43,180 or 14.4%
• $1,000,000 would pay $162,180 or 16.2%.

In other words, the millionaire pays 238 times as much as the lower income family in dollar terms, and 11 times as much in percentage terms.

We could debate the rate and the size of the personal exemption. Personally, I think 17% is too high. And the new tax structure should be revenue neutral, not an excuse to sneak in a tax increase (which should be greatly reduced, along with spending).

But there’s no doubt about what a flat tax would accomplish:

• It's progressive; the more you make the more you pay in both dollar and percentage terms.
• It's fair; every dollar of taxable income is treated the same--i.e., no income discrimination.
• It's pro-growth; economic success is not penalized by higher rates.
• It would reduce both the incentive and opportunity to cheat on taxes.
• We could eliminate the IRS as we know it, saving billions in government spending and tens of billions in private citizens’ tax preparation fees.

We could, in short, take a bad institution—the income tax—and make it a lot less bad. Who could have a problem with that?

One more thing. I wouldn’t call using tax authority to harass political groups “laughable.” Such harassment is a fundamental threat to a free society. There’s nothing laughable about that.

---------------------------------

Read the Star-Ledger editorial yourself. You, too, might get the sense, not that more funding is needed, but that, “Hey, why save this hideous institution at all?”

Related Reading:

Time for a Flat Tax

In N.J., a Flat Tax, Not a “Millionaires Tax,” is the Fairer Solution

In N.J., a Flat Tax, Not a “Millionaires Tax,” is the Fairer Solution

New Jersey is in the throes of a major “budget crises,” and, led by State Senate President Stephen Sweeney and Senate Majority Leader Loretta Weinberg, the Democrats have proposed a “solution”—levy a so-called “millionaires tax” to balance the budget; a tax increase on annual incomes above $500,000. In a dueling pair of New Jersey Star-Ledger Sunday op-eds, two correspondents took opposite sides in the debate. The topic question: If a “millionaires tax” is implemented, “Will the wealthy flee N.J.?”

State Senator Joe Kyrillos argues a millionaires tax would inspire the wealthy to move out of the state, not only depriving the state of the expected revenues but also the jobs these economically successful individuals and their capital create and maintain. Gordon MacInnes, president of New Jersey Policy Perspective, argues that “The wealthy exodus is a myth.”

But both writers miss the fundamental moral point: It is simply wrong and unfair to target a small group of state residents for discriminatory tax increases simply because they are the most economically successful. There are several reasons for this.

For one thing, the budget crisis was created by politicians elected by a majority of state voters. It's simply wrong to dump the budget "fix" on a tiny minority of state residents.

For another thing, NJ’s income tax is already among the most confiscatory in the nation for high earners, with the rates starting at 1.4% and topping out at 8.97% for incomes over $500,000.

Furthermore, the wealthy have already been hit with two millionaire’s taxes in the last decade. As MacInnes points out:

In 2004, New Jersey increased the top income tax rate on households reporting more than $500,000 in income from 6.37 percent to 8.97 percent. This initial “millionaires tax” is still on the books, and was supplemented by a temporary one-year tax increase on incomes greater than $400,000 in 2009.

The most egregious aspect of the millionaires tax is the spectacle of a government targeting a small minority.

But we get the government we elect. A millionaires tax is popular in NJ, according to polls. In March, 63% favored such a tax. In other words, for most New Jerseyans, “Raise taxes, but only on the other guy,” is fine and dandy. But I consider such a sentiment morally corrupt.

But I wonder what that poll would look like if we had a flat tax.

I consider an income tax to be immoral and un-American. But if we’re to have one, the least unfair kind is a single rate on all incomes—a flat tax. I have taken this stand on a national level for both personal and corporate income taxes, and I support it on the state level.

So imagine if NJ had a flat tax—of, say, 5%—on all taxable income. The only way to raise taxes would be to raise the rate; which means, raise taxes on all taxpayers. What would then be the poll results? The same poll cited above asked respondents if they favored a hike in the gasoline tax. 72% opposed. Likewise, 71% oppose a tax hike on water consumption. Yet, 63% support a millionaires tax. Why the discrepancy? Could it have something to do with the fact that taxes on gas and water would hit almost everyone, but a millionaires tax will hit only a fraction of 1% of the people? If NJ had a flat income tax, does anyone doubt that the poll would show similarly overwhelming negative results on a question concerning a hike in the income tax, rather than register 63% support?

But the hypocrisy of voters is not the worst of it. A government should never have the power to levy coercive taxes. But, since it does, those taxes should be as fair (or least as unfair) and non-discriminatory as possible. A government of, for, and by the people means all of the people—every single individual. All individuals should be treated equally before the law. That is a feature of capitalism. It could never be fully achieved in our mixed economy—our mixture of free market capitalism and government controls. But, a flat tax would be a big moral improvement.

Related Reading:

In the Spirit of “Compromise”, How About a Flat Tax?

Toward Less-Unfair Corporate Taxes

How Would Government Be Funded in a Free Society?—Craig Biddle

Education in a Free Society—C. Bradley Thompson

Rather than Repeat the Mistakes of 1986, How About a Flat Tax?

Carl Leubsdorf's Tax deadline, and no reform in sight says "it’s time to repeat the mid-1980s exercise that simplified the [income tax] system and helped spur economic growth."

That's a start. Short of full repeal, which should be done but which is politically unfeasible today, the abominable Federal income tax needs desperately to be reformed or replaced.

For guidance to reform, Leubsdorf looks back:

The 1986 bill reduced the number of tax brackets and eliminated many special-interest provisions, while raising capital gains and corporate taxes and providing a modest increase in revenue. Since then, many new deductions and credits have complicated the tax code and exacerbated inequities in which some wealthy taxpayers pay a lower real rate than middle-class Americans.

Why the return of complications and inequities? Precisely because the 1986 bill merely "reduced the number of tax brackets and . . . special-interest provisions. . ."

The big problem with the current graduated income tax is that it is a magnet for special interest lobbies seeking to pressure lawmakers into inserting tax provisions that favor them. As long as multiple tax brackets and deductions and credits and the like exist in any form, the door can never be closed to special interests lobbies. On what basis does congress grant one pressure group its special provision, while denying to the next group its special provision?

Leubsdorf highlights the problem for reformers. He notes that Rep. Dave Camp of Michigan outlined a plan that . . .

would restore three tax rates (15 percent, 25 percent and 35 percent), reduce corporate taxes, place an excise tax on banks, repeal state and local tax deductions, and place an income ceiling on deductions for mortgage interest and charitable contributions.

The response to Camp's plan was predictable:

It was buried by criticism from groups unwilling to accept broad-based tax cuts in return for elimination or reduction of some special-interest provisions.

How to overcome this problem? A flat tax that eliminates all  special tax provisions save for a single personal deduction for each individual, no exceptions. No more special interests: The door would be slammed on deductions, credits, and the like. No more fighting over tax rates, particularly the unseemly spectacle of people demanding tax increases, but only rate increases that effect the other guy: Everyone pays the same, and any change in rates would effect everyone who pays taxes, because the code is locked in to only one rate.

Steve Forbes laid out a plan worth considering in his book "Flat Tax Revolution." In Forbes' plan, there would be one rate of 17%, after a single but generous personal exemption for every taxpayer and every dependent. Under Forbes' plan, the hypothetical "family of 4" would pay no income tax on approximately the first $46,000 of income, and then 17% on every additional dollar of income.

Leubsdorf notes that "the only bipartisanship that Camp’s plan produced was both parties’ criticism." No wonder. But something along the lines of Forbes' plan would be an entirely different animal. The only areas for debate would be the tax rate and the size of the personal exemption.

On paper, the Forbes' plan would look (roughly) something like this; 

• a family making $50,000 would pay $680.00 yearly on an effective tax rate of 1.4%; 
• a family making $100,000 would pay $9180.00 or 9.2%; 
• $150,000=$17,680 or 11.8%; 
• $300,000=$43,180 or 14.4%; 
• $1,000,000=$162,180 or 16.2%.

Since compromise is the holy grail these days, this is one tax reform proposal that every honest politician Left or Right should be able to live with. It's a plan that only politicians who love seeking votes by promising tax favors could hate.

It's progressive, but justly so. The millionaire pays 238 times as much as the lower income family in dollar terms, and 11 times as much in percentage terms. It's fair: Every dollar of taxable income is treated the same--i.e., no income discrimination. It's pro-growth: Economic success is not penalized by higher marginal rates.

The same principles can and should be applied the corporate income tax.

While I strongly disagree with Leubsdorf that tax reform should increase overall taxes, or taxes aimed only at one group (such as the "rich"), I agree that we should have tax reform. This time, let's have real reform that is both meaningful and more fair (or as I, an opponent of the income tax would put it, less unfair).

Related Reading:

Toward Less-Unfair Corporate Taxes

Apple and a Flat U.S. Tax Code

The NJ Star-Ledger said in a recent editorial that Apple's tax avoidance highlights the need for tax reform. But they took a cheap shot at Apple, labeling the company a "money launderer." But, surprisingly, the editors gave the company a back-door compliment by saying that Apple and other big companies would "likely dominate any new tax debate that involves our money-hungry federal legislators." 

Such a description of Washington politicians as "money-hungry" is rare in a "liberal" newspaper, which usually directs such pot shots at producers, rather than looters. Apple, whose CEO Tim Cook called for tax reform before congress, would be doing the country a favor by fighting to keep as much money as possible in the hands of the companies and individuals that earned it. Unfortunately, most would likely do so by fighting to preserve their favored tax breaks, rather than by lowering rates. That's why the editors pessimistically referenced the 1986 tax reform which, as I have previously noted, left the door open to special tax structures and thus failed to solve the problem.

These peripheral issues aside, the editors are right about tax reform in one sense--we need it now. I left these comments:

Whenever you hear incantations to the "public welfare" and the "national interest," you know that someone is about to get screwed. Since the "public" and the "nation" is merely an association of individuals, these collectivist terms mean that some people's interests and welfare takes precedence over some others.

Sure enough, Apple is smeared as a money launderer for keeping more of the money it earned by providing products that billions of consumers value enough to voluntarily buy. This, despite the $6 billion in taxes it actually did pay.

Yes, the income tax code is a mess. However, I don't share the editors' pessimism about reform. Congress should create a new flat corporate tax code that eliminates all current tax preferences and statutorily bans all future preferences and drastically lowers the rate from the criminally confiscatory 35%. This would eliminate the special interest feeding frenzy. Similarly, the individual code should be scrapped and replaced with a low flat rate, but with a single, generous personal exemption (Steve Forbes has proposed a plan that would make roughly the first $46,000 of income for a family of 4 tax free).

Flat taxes are fair. And, considering the recent scandals involving the IRS, these reforms are the least we could do to protect our economic and political liberty. It would reign in the dictatorial power of that corrupt institution.

In the meanwhile, kudos to Apple for its highly moral and patriotic legal tax avoidance. It's always heartening to see producers keep as much of their earnings from the "our money-hungry federal legislators" as they legally can.

Related Reading:

Apples Patriotism Highlights Urgent Need to Abolish the IRS and Institute a Low-Rate Flat Tax

Time for a Flat Tax

Toward Less-Unfair Corporate Taxes

Apple's Partriotism Highlights Urgent Need to Abolish the IRS and Institute a Low-Rate Flat Tax

This letter appeared in the New Jersey Star-Ledgeron May 24, 2013:

Disband the IRS
Congress is discussing whether to effectively raise income taxes on Apple. If Congress decides to close tax loopholes, it is imperative it creates an agency other than the IRS to collect these taxes. The American people do not trust the IRS.
Maybe Congress should defund the IRS and install a flat tax instead. That would give the government the same revenue it gets now.
Sanford Aranoff, Monroe Township

I left these comments:


I agree.

Apple acted morally and patriotically by utilizing every available legal means of avoiding taxes. The attacks by power and tax-hungry politicians and statist media is totally unjust. Apple earned their profits by providing billions of consumers worldwide with valuable products they willingly paid for. The politicians simply want to seize Apple's legitmate profits despite the fact they broke no laws.

Disband the IRS. Rather than close "tax loopholes" (raise taxes), we should drastically lower taxes (and compliance costs) for everyone by means of a low-rate flat tax for both individuals and corporations. The injustice against Apple as well as recent events concerning IRS targeting of conservative groups should convince everyone of the threat this massive, corrupt agency poses to our economic and political liberty.

To Apple's critics, I would only add: Anyone who, in the shoes of Apple's management, would have done any differently are either hypocrits or fools.

Related Reading:

Time for a Flat Tax

Toward Less-Unfair Corporate Taxes

Apple's Tax Avoidance Justifies Moral Outrage--Toward those Harrassing and Smearing Apple by Ari Armstrong

Replace the Corporate Income Tax Mess with a Low-Rate Flat Tax

The House Ways and Means Committee is taking a hard look at the corporate income tax. In my latest post at The Objective Standard blog, Toward Less-Unfair Corporate Taxes, I offer a suggestion.

Time for a Flat Tax

Who is to blame for the sequestration stalemate? To Leftists like the NJ Star-Ledger's editors, To Save Tax Loopholes, GOP Causes Crisis. In fact, the GOP is rightly holding fast to its determination not to raise taxes to bail the federal government out of the spending mess. The basic problem, Republicans correctly hold, is a spending problem. 

The editors, for their part, actually believe that singling out "the rich" will somehow solve the problem. Of course, that's nonsense, and I'm sure they and others of their ilk know it. For the Left, "tax the rich" is not a practical fiscal suggestion. It is a moral/ideological crusade. They write:

The core disagreement in this crisis is over taxes. President Obama wants to raise money by closing some of the loopholes that favor the wealthy, while Republicans insist on spending cuts alone. 

So let’s look at these tax loopholes. These are the credits and deductions that crowd the code and make it as thick as a telephone book. The big money is in middle-class favorites such as the deductions for home mortgage payments and local property taxes. But the list includes big breaks for hedge fund managers, oil and gas companies, and a long list of special-interest groups that donate big money to politicians in both parties. 

How much do these tax breaks cost each year? More than the entire defense budget. More than Social Security. More than Medicaid and Medicare combined. It comes to a little more than $1 trillion per year. 

And who benefits? You may have guessed already, but this is another case of Republicans guarding the interests of the wealthy elite. The richest 1 percent of American households claims 24 percent of the benefits. The poorest 20 percent get just 3 percent.

Of course, as at least one correspondent pointed out, the editors ignore the other side of the ledger--the fact that the wealthiest pay the lion's share of the federal income tax.

That said, notice the fundamental premises underlying the editors' terminology--namely, "cost" and "loophole."

I left the following comments:

First, let's extinguish a hideous premise. The editors claim that tax deductions are "loopholes" that "cost" the government $1 trillion. But that is a statist premise that holds that the government has first claim on everyone's income, and that any earnings retained by private earners is only by grace of the government. This is morally and factually inverted. All money is first and foremost the property of the people who earned it. Therefor, tax deductions or credits leave more money in the hands of its rightful owners. There is no "cost" to the government, since the government has no inherent claim to that money in the first place. 

Having said that, we must acknowledge that the tax code is an abomination. That "telephone book" of tax preferences is the result of decades of special interest pressures and vote-buying, and is grossly unfair. So, why not throw out the book, and go with a tax that is fair, pro-growth, and justly progressive--a flat tax. That's a compromise that should satisfy both "liberals" and conservatives.

How would it work? See below. 

Steve Forbes laid out one such plan in his book "Flat Tax Revolution." In brief, there would be one rate of 17%, after a single generous personal exemption for every taxpayer and every dependent. In brief, the hypothetical "family of 4" would pay no income tax on the first $46,000 of income, and then 17% on every additional dollar of income. 

This means that a family making $50,000 would pay $680.00 on an effective tax rate of 1.4%; a family making $100,000 would pay $9180.00 or 9.2%; $150,000=$17,680 or 11.8%; $300,000=$43,180 or 14.4%; $1,000,000=$162,180 or 16.2%. 

In other words, the millionaire pays 238 times as much as the lower income family in dollar terms, and 11 times as much in percentage terms. It's progressive; the more you make the more you pay in both dollar and percentage terms. It's fair; every dollar of taxable income is treated the same--i.e., no income discrimination. It's pro-growth; economic success is not penalized by higher rates. Since compromise is the holy grail these days, this is one that every objective person Left or Right should be able to live with.  

Stop blaming Republicans. The code is a bi-partisan abomination. Rather than pick and choose which deductions and credits to get rid of, let's get rid of them all--save one applied equally to everyone--and go with a flat tax.

There may be elements of Steve Forbes's plan that I may not agree with. It's been a long time since I read his Flat Tax Revolution. That aside, if we must have an income tax because of political realities, we can at least fight for a truly fairer one. I believe that a Forbes-style flat tax would be a more moral system than what we have now.

In closing let's listen to what Objective Standard Editor Craig Biddle had to say about the use of the term "loophole": 

To what facts of reality does the word “loophole” refer as used by the media in this context? It denotes various means by which people are still free to act on their own judgment; it specifies aspects of life in which individual rights are not yet being thoroughly violated by the government. In other words, it names a wonderful yet rapidly diminishing thing called freedom—which users of the term “loophole” seek to smear as corrupt.

Related Reading:

In the Spirit of "Compromise," How About a Flat Tax?

"Loophole": Anti-Euphemism of Statists, by Craig Biddle

In the Spirit of “Compromise”, How About a Flat Tax?

The recent compromise between President Obama and the Republicans that extended the Bush tax cuts for two years has put the income tax on the back burner, for now. But, it could become a major issue as the 2012 election approaches.

In a recent NJ Star-Ledger article, Compromise holds no hope for deficitNJ Assemblyman John S. Wisniewski (D-Middlesex) has weighed in with some thoughts on the recent Obama-GOP tax deal. He begins by charging the president with “succumbing to Republicans’ unflinching protection of the wealthiest of Americans”.

Apparently – and this is standard Leftist fare – Wisniewski doesn’t believe that all Americans deserve equal protection under our government. The horrifying implications of that statement need no commentary here. The Democrats have nothing but utter disdain for the US Constitution, and the principles upon which it rests, as everyone by now knows.

That aside, I want to put in a plug for an idea regarding major income tax reform. With the GOP ascendancy, and so much of his statist agenda already in place, Obama may be willing to take a breather as he looks forward to re-election. We could see major tax reform emerge from the battle over “tax cuts for the wealthy”. I don’t expect Obama to morph into a free market Rightist. He is socialist/collectivist ideologically, and always will be. He will keep his eye on that North Star. But he may be willing to give a nod to the Right – “tack this way or that”, as he put it - if for no other reason than to appear “centrist”, and actually sign on to some kind of sensible reform of our income tax code.

So, let me present an idea that the Republicans can use to take advantage of Obama’s temporary fit of centrism.

But first, let’s cut through some of the clutter exemplified in Wisniewski’s article.

First of all, this is not a debate about the deficit. Given the wild spending of both Republicans and Democrats in both NJ and nationally over the past decades – and especially the past ten years - neither party can be taken seriously on that score. In any event, government deficits are caused by too much spending – period. Liberals like to imagine the nation’s wealth as belonging to the government, and thus see raising taxes as the only solution to deficits. In Wisniewski’s perverted “logic”, we are “padding the deficit to pay for tax cuts [for the wealthy]”. Actually, he proposes to steal money belonging to a small minority of Americans who will be excluded from a tax benefit shared by all other Americans in order to cover the politicians’ profligate spending. This is a debate over fairness, and there is nothing fair about targeting a specific group for confiscatory taxes. If we’re talking about deficits, we’re talking about spending cuts.

And never mind that the rich must be taxed extra to fund worthy causes. There is nothing honorable about politicians practicing forced “charity” for the elderly or the poor or the disabled with other people’s tax money. And there is nothing honorable about receiving the money paid unwillingly by those taxed.

More fundamentally, it’s not about taxing millionaires and billionaires. The reference to Senator Lautenberg is disingenuous, to put it politely. It’s lovely that Lautenberg would “rather have a strong country than a tax cut”. But, Lautenberg’s millions, and the fortunes of all of today’s “rich”, are out of reach of the income tax. The tax debate is about taxing current earnings … i.e., current production. Not to denigrate the Senator’s business success: He did earn his money, and has a moral right to it. But his fortune is old money. His current income, no matter what rate it is taxed at, is peanuts to him. This explains, at least in part, why so many of the prominent wealthy are socialist oriented.

Rich people like Lautenberg, their previously established fortunes safely protected from income taxes, are after power and prestige - the political power to seize other people’s money, in order to spread it out among his favorite welfare clientele like the “alternative energy” gang or some needy group, so he can claim the unearned, phony prestige of making a “strong country” paid for out of his fellow countrymen’s hides.

When the Left demands higher taxes on the rich, what they are really calling for are taxes on the productive rich. The idle rich like Lautenberg get off scot-free. This is why steep, progressive income taxes hurt everyone. Economic growth is built on current income – i.e., current wealth production. Today’s existing fortunes represent past production. Today’s high earners represent current and future production. The top 2% of income earners represent fortunes in the making – the creators of businesses, products and services, jobs – that other less productive but hard working middle and future middle income people depend upon.

If Assemblyman John Wisniewski and others really care about “the economy” and “the middle class”, they would acknowledge these facts, and radically alter their positions on the income tax.

Now, let’s get to my compromise tax reform proposal. Before I proceed, though, let me state my philosophical position on the income tax. I would love to see income taxes abolished across the board. They are immoral because they strike directly at the heart of human survival – our ability to produce the things required to live and flourish – and they feed the power of politicians and government bureaucrats to control and manipulate our lives. They are impractical because they hamper productive activity (i.e., the economy). Furthermore, they are inconsistent with the constitutional protections for property rights and probably unconstitutional, the 16th Amendment notwithstanding. They are certainly inconsistent with our Founding principles. In any event, the income tax has become a vehicle for widespread wealth and income redistribution. That is clearly immoral and incompatible with the Declaration of Independence, which establishes the principle that the proper purpose of government is to protect individual rights. There is no constitutional authority for redistribution, a fact readily acknowledged by our current president.

However, I realize that abolishing the income tax is a long-term goal and cannot happen today. So, since “compromise” is in the air in the wake of the recent elections, let me propose one of my own – a flat (or single-rate) income tax with no deductions or exemptions other than personal exemptions at the bottom (Steve Forbes has proposed a flat tax that contains exemptions that would make the first $40,000+ tax free for a family of four). That should satisfy liberals because it maintains progressivity. Since everyone pays the same percentage, the higher the income, the higher one’s tax burden would be. Assuming for the sake of argument that the rate is set at 10%, someone with taxable income of $50,000 pays $5000; someone who makes ten times as much - $500,000 - pays ten times as much in taxes, or $50,000, and so on. It would take a monumental act of evasion for anyone to claim that a flat tax is not progressive.

For conservatives, they would get the pro-growth incentives of lower tax rates.

In addition, since each dollar of income, no matter how much, is taxed at the same rate, the flat tax is much fairer and is non-discriminatory. And since everyone professes to abhor “special interests”, this would be a boon: the pressure groups would have nothing to gain from lobbying for tax issues, because the politicians would lose the ability to manipulate us through tax policy.

Now, that would be real change we can count on!