Thursday, October 20, 2011

Flat Tax? 9-9-9?

Is this the year when a scrap-and-rewrite of the tax code will finally come to reality? It seems like a rite of passage in the Republican primaries for at least one less-popular candidate to get attention by announcing some version of tax simplification. This year we've got two. Herman Cain started the fun with his 9-9-9 tax proposal. Rick Perry is now trying to resurrect his campaign with a more "traditional" flat-tax proposal.

I can't imagine either plan ever being enacted, even in a modified form, and I'm not at all sure I would want either one, or anything like them. But, I've had a difficult time clearly understanding my hesitancy. Scott Adams (he of the Dilbert comics) helped me out today with a post on his blog.

Flat Tax

The quote that really stood out to me:

"I think most people like the idea of a simpler tax code. No argument there. But I've never met a person who would volunteer to pay higher taxes in exchange for simplicity."

He goes on to explain that these ideas play on a vague impression many of us have that the rich in our country pay a lower tax rate than the middle class, because they find some way to trick the system. That may be true for a few, but it is probably not true for most.

If we are going to simplify the tax code, I think we need to do it gradually over about 20 years, systematically removing tax exemptions, addon taxes, and other tax complexities, and compensating for each change with slight increases in the base tax rates.

Adams also makes a great point about the use of the word "fair", and how both sides of the argument use it for their own purposes. It has not real meaning in itself (it means whatever the hearer thinks it should mean), but it carries great emotional power. That gives it a unique power to be divisive.

What do you think? Do you have a great suggestion for revolutionizing our tax code? How would you define "fair" taxation? Flat tax? Progressive tax? Something else?