A must-read opinion piece in today's Wall Street Journal completely debunks the GOP "Norquist-promoted" flat tax.
The piece is written by Alan Blinder, former Vice Chairman of the Federal Reserve, and it contains a treasure-trove of points that Rick Perry, Hermain Cain, and other flat-taxers in the GOP don't want the public to know. Steve Forbes, the Godfather of the flat tax, is doubtlessly taking valium this morning to keep from exploding over this revelation of the truth. Among the better points...
The flat tax is typically marketed as a way to achieve drastic tax simplification—something virtually everyone favors, at least in the abstract. But what a flat tax would actually achieve is a drastic reduction in tax progressivity.
This is the first point Blinder is making, and the most fundamental. The flat tax is just a scam, packaged with pretty "simplification wrapping". Who doesn't want things to be simple in life? That's an aspiration of the left, right, and center. Sadly, making things simpler does not make things fairer....unless you're in the Top 1%.
Another important point Blinder makes early in his piece...
Sad to say, our ungainly tax code is a logical byproduct of our system of democracy-by-lobbyist, which often produces messy, unprincipled outcomes.
Money in politics = more money in rich people's pockets. At the expense of everyone else. That's essentially what Blinder is saying in the above quote. He gets it
The thing to remember is that Republicans appeal to simple-minded thinking that is, in the end, self-serving for their own wealth creation, and the wealth-creation/preservation of their Top 1% wealthy benefactors. As Blinder points out...
Many useful steps could be taken to simplify the personal income tax. But, contrary to much misleading rhetoric, flattening the rate structure isn't one of them. The truth is that 100% of the complexity inheres in the definition of taxable income, which takes up millions of words in the tax laws. None inheres in the progressive rate structure.
EXACTLY! Why so much focus and attention by GOP presidential hopefuls on a single lower rate, whether 20%, 23%, or 9-9-9? BTW, Blinder was interviewed about this on CNBC the past hour, and he termed 9-9-9 a "campaign joke".
Anyway, the rates are lowered and flattened for one reason, and one reason only...more wealth redistribution from the 99% to the 1%. Blinder goes through several examples of how this would work in his piece, and illustrates how the super-rich, say those making $20 million a year or more, get a huge windfall benefit from a flat tax, while those in the typical $50k per year category, get no windfall and most likely would have to pay significantly more. Read the piece to see his examples in full view.
His conclusions are intuitively obvious for anyone with half a brain (which exludes much of the GOP presidential hopefuls)...
So far, we have two conclusions: Accomplishing vast tax simplification is unlikely in the extreme; and flattening the rate structure won't make the tax code any simpler. It would, however, make the tax system far less progressive.
As far as GOP talking points in rebuttal to his thinking, Blinder attacks that as well...
One final, and important, point: Advocates of the flat tax, or of regressive tax changes in general, often argue that it's unfair that 47% of American households pay no federal income tax at all. But is it? These alleged "freeloaders" don't get off the taxpaying hook; they pay payroll taxes, sales taxes and many others. The income tax and the estate tax are virtually the only progressive elements in our tax system. If you take away progressivity there, precious little remains.
Yes, pity all those "freeloaders" who Michelle Bachmann, Hermain Cain, Rick Perry, and others want to put their thumbs on even more than they currently are. And, finally...
So the next time you hear the charge of "class warfare," ask yourself which class is waging war on which—and which class is winning.
BINGO! Blinder has nailed it here, and telling it like it is in a conservative Murdoch publication such as the WSJ is a heroic feat. My hat's off to him. Pretty soon, maybe others will chime in to support his analysis. One can only hope that Congress, already shown to be corrupt to the core especially in light of last night's 60 Minutes story, might resist any future attempts to go to a flat tax, no matter who the next President may be.