The time came a long time ago, as a matter of fact.
Proponents of tax reform explain that there are many reasons to junk the internal revenue code and adopt something like a flat tax.
- Improve growth – The low marginal tax rate, the absence of double taxation, and the elimination of distortions combine to create a system that minimizes the penalties on productive behavior.
- Boost competitiveness – In a competitive global economy, it is easy for jobs and investment to cross national borders. The right kind of tax reform can make America a magnet for money from all over the world.
- Reduce corruption – Tax preferences and penalties are bad for growth, but they are also one of the main sources of political corruption in Washington. Tax reform takes away the dumpster, which means fewer rats and cockroaches.
- Promote simplicity – Good policy has a very nice side effect in that the tax system becomes incredibly simple. Instead of the hundreds of forms required by the current system, both households and businesses would need only a single postcard-sized form.
- Increase privacy – By getting rid of double taxation and taxing saving, investment, and profit at the business level, there no longer is any need for people to tell the government what assets they own and how much they’re worth.
- Protect civil liberties – A simple and fair tax system eliminates almost all sources of conflict between taxpayers and the IRS.
All of these benefits also accrue if the internal revenue code is abolished and replaced with some form of national sales tax. That’s because the flat tax and sales tax are basically different sides of the same coin. Under a flat tax, income is taxed one time at one low rate when it is earned. Under a sales tax, income is taxed one time at one low rate when it is spent.
Neither system has double taxation. Neither system has corrupt loopholes. And neither system requires the nightmarish internal revenue service that exists to enforce the current system.
All of the reasons given above are good ones, logical ones, fair and workable ones…and are also why our misbegotten government will resist with all its considerable might; its minions and apparatchiks are quite simply opposed to every last one of them. Still, read it all anyway; Dan lists several other reasons for this sort of reform that ought to be compelling, but won’t be to the sewer rats currently in charge.
Update! Good comment at WRM’s joint:
In describing the RR approach it’s more precise to use the phrase “tax rate” for the cuts they envision. Overall their goal is to recognize Hauser’s law for the fact that it is: “no matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5 percent of GDP.”
Among the conclusions that can be drawn is that one increases tax revenue by increasing the GDP. That argues for lower tax rates to stimulate growth while the taxman taketh 19.5% of a larger pie.
Hauser’s law also implies that raising tax rates reduces GDP, thereby reducing tax revenue. You still collect your 19.5%, but it’s from a smaller pie.
If you really want to strangle growth, keep all tax rates where they are and add a VAT. This is a trick we learned from the old country. Works like a charm.
Yep, every time it’s been tried, and to everyone’s detriment. This is called, by liberal fascists, “watching out for the little guy,” “protecting the middle class,” and other such bass-ackwards nonsense.