To Flatten or Not to Flatten: Is that Really the Question?

(First published as To Flatten or Not to Flatten: Is that Really the Question? on Blogcritics.) On Monday, the Bloomberg editorial staff came down on the side of making the tax code more “progressive”.  The piece was in response to flat income tax proposals from three or four of the current Republican presidential primary candidates. One can only hope that what passes for thinking in that article is not repeated in future Bloomberg work because it’s very deficient indeed. You’d need a map and a compass to journey deeper into mindlessness, but then, being mindless already, you couldn’t read either one.

Still, the flat tax flap does give pause for thought. Is flattening federal income taxes really what the Republican candidates want? Or are they using the idea as a gimmick? As a recent Blogcritics offering laments, intellectual thought rarely makes an appearance at a political debate.

Assessing the current GOP flat tax proposals with this precaution in mind, are they just shallow attempts to grab the ever-fickle media spotlight? Or, like a lightening rod, are they purposefully erected to draw attention to the real problem? Or is it a combination of the two – a spotlight-grabbing gesture that accidentally shines light on a serious issue? Door Number Two would be nice. Really. And we really think the answer lies there.

The Bloomberg article is a string of knee-jerk claims that ignores the essence of the flat income tax argument. For example, a true flat tax is based on gross income rather than adjusted gross, resulting in a net revenue gain. It also simplifies the federal tax code. Today, that legislation, together with the IRS’s interpretive rulings and regulations, is almost 73,000 pages. It’s a conglomeration of complexity and convolution that almost no one, including your friendly taxman and White House officials, understands.

But, Bloomberg editors are happy with it and they should be happy for a long time to come. The flat tax idea has been around for decades and has gained absolutely no Congressional traction. While it has a popular fairness appeal, it cannot withstand the phalanx of special interests arrayed against it. The tax code is not an unintelligible mishmash by happenstance.

So, why are the Republican candidates talking about it again? The facile answer is the coveted media attention lavished on Herman Cain for his 9–9–9 plan, which includes, among other things, a flat tax. In what appears to be predictable monkey-see-monkey-do chain reactions, several of the other Republican candidates formulated flat tax proposals, too. But, is that really all they’re about? Inhabitants of a Pavlovian kennel, classically conditioned to crave the spotlight?

More likely, they are simply cowards. Pushing an idea with some popular appeal, these people are actually advancing a fairness argument they fear to make directly. And here it is. The problem with the federal revenue system is that too few people pay into it.  Put another way, too many people take too much out of it.

As we know, nearly half of all federal tax filers either pay no income tax or pay a negative tax. That number is increasing and not merely at the lower income levels. The fastest growing group of income tax non-payers includes those earning between $75,000 – $100,000 annually. These people cannot even pretend to be among the financially downtrodden yet they’re getting a free income tax ride. Meanwhile, the government’s generosity to them has a multiplying effect on the deepening federal debt burying our economy and us with it. It’s pure insanity.

We teach our kids to avoid child predators, those depraved individuals who would do them harm. Children are told to reject the lures of candy and puppies and other cute stuff and simply run away screaming for help. As adults, we have to do the same thing. When Uncle Sam tries to snuggle up using fistfuls of fiscal candy, we need to run away screaming, too. The scary arithmetic lurking behind those promises will do us all in.

See you in the mirror.