Last week, Mark Thoma wrote, Blow Up the Tax Code and Start Over??? He started it with, “Here we go again with the flat tax proposals.” Of course! Because this is the start of the presidential election and the flat tax is about the only policy the Republicans have that sounds appealing. Of course, it isn’t appealing. As long as people like Rand Paul (the case at hand) stay vague, it all sounds great. It is only when they get down to the details that we see that everyone who makes less than a hundred grand a year will end up paying more in taxes.
The reason that the flat tax sounds so appealing is that everyone thinks that filing taxes is a pain. It is! Even if you just have to file 1040-EZ, it’s still a pain. No one likes paper work. So the idea that we could just write down how much money we made and multiply it by some percentage rate sounds great. But wait: that isn’t what people hate about filing their taxes. No one says, “Oh, I have no problem with all the work I do to figure out my adjusted gross income; but looking up my tax in that table! That’s just terrible!”
So that’s the truth of the matter: the marginal tax rates are absolutely the least onerous part of filing our taxes. And that’s the only thing that would change with a flat tax. And even it wouldn’t be an improvement! What’s harder: looking up a number in a table or multiplying one number with another? I think it’s a wash. So you have to wonder: why are conservatives so all fired excited about the flat tax? There’s no surprise in that answer. As with all efforts by conservatives to “reform” the tax code, the intention is to lower taxes on the rich and raise them on the poor.
This is why conservatives have a laser focus on the federal income tax: it is modestly progressive. State income taxes tend to be pretty flat. State sales taxes are regressive. Property taxes are flat. And the payroll tax — the biggest federal tax on the working poor — is highly (Ridiculously!) regressive. Forget all you hear from libertarians about how great “local control” is. The reason they believe in “local control” is because the poor are usually stuck wherever they are but the rich can move anywhere they want. Thus local governments gouge the poor and let the rich off so as not to cause them to move away.
Thoma noted that even Rand Paul admitted that his flat tax would lower the taxes on the rich. But in order to offset this, Paul claims that the tax loopholes mostly benefit the rich. There is something to that. But it is clear this is just a way for Paul to imply that his flat tax wouldn’t be a giveaway to the rich without having to actually show this. But it’s just perfect: make the one modestly progressive tax in the United State flat because that’s “fair.” But ignore all the other taxes that harm the poor.
Of course, according to Paul, his “Fair and Flat Tax” would create an economic boom. He knows this because he had the people at the nonpartisan Tax Foundation look at his plan. The Tax Foundation may be nonpartisan, but it is conservative — very conservative. Thoma — who is usually pretty restrained — commented, “I bet it would almost be as good for the economy as the Bush tax cuts. Oh wait…” But I think it is amazing that the mainstream media allow Republicans like Rand Paul to talk about the federal income tax to the exclusion of all other taxes. The only people who really care about that tax are the rich. How about we talk about the payroll tax? If we got rid of the cap, maybe we could lower that tax rate.