Thinking about tax reform

By Rod D. Martin
web posted November 22, 1999

Almost everyone agrees we need tax reform. The current tax code is a disgrace, and its enforcers are abusive.

Yet in creating a new code, just anything won't do. Three principles must guide our design: Workability, Visibility and Fairness. The current system is good at the first of these -- it collects taxes effectively enough -- but it actively subverts the other two. It is in them we will find relief.

Visibility has been designed out of almost every tax system in the world. The reason is simple: to arbitrarily and unaccountably tax, you must design a code no one can understand. Failure to do this in the 18th century produced the greatest tax revolt ever -- the French Revolution -- and governments everywhere have taken notice since. If Americans want to know exactly what they owe and why -- thus making it difficult for Washington to unaccountably tax and spend -- they must design an open, simple code.

Likewise, the current tax system loathes fairness. Designed by liberal "wise men" whose chief aim was to "redistribute wealth" (i.e., steal from some to give to others), our current system not only takes different amounts from people based on their incomes (robbing the rich to give to the poor), but also subsidizes big corporations and special interests (robbing the poor to give to the rich), penalizes marriage (robbing the family to give to la vida loca), siphons off capital gains (robbing your pension fund and home equity to give to bureaucrats), and even taxes your death (robbing your children before you're cold in the grave). The current system is purely theft; every drop of fairness is squeezed out.

What we need is a flat tax.

This is a matter of some debate among reformers. Some would prefer a national sales tax, primarily for ease of collection. But a sales tax is even more invisible than the current system: you only see it a little at a time, and government can easily set different rates on different items. With a sales tax, no one really knows what they pay each month, or year. This fuzziness helps big government, not people.

A flat tax, however, addresses all these issues.

It's easy to administer: most people's taxes could be filed on a postcard. Most of the IRS could be immediately dismissed.

It's easy to understand: everyone could figure in their heads how much they owe. If liberals raised taxes, they couldn't hide the hike behind umpteen deductions and exemptions as they do today: they would have to say precisely how much taxes were going up, for everyone. When they did, they would have to face the wrath of a populace that actually knew how much its pocket was being picked.

And above all, a flat tax is fair. Everyone pays the same percentage of their income: no brackets, no loopholes, no shelters.

We must also abolish withholding. Withholding defeats visibility: it lulls taxpayers to sleep. They learn to look only at their net pay, and because they don't know how much they really owe, they even look forward to their zero-interest "refund".

Our new tax system must end this. At the end of each month, a worker's pay stub will show exactly what he owes (not the estimated overpayment of the current system); then, having deposited the whole (gross) paycheck, the worker will write a personal check, just as for all his other bills.

When he has to write that check -- when he actually has to take money out of his pocket and hand it to the government -- he will begin to demand accountability and frugality from Washington. In fact, he'll vote that demand into office.

A flat tax -- such as the system Dick Armey, Steve Forbes and I have proposed that includes a built-in tax cut -- will create incredible opportunity for poor and middle class Americans to get out of debt and get ahead. It will reward -- rather than punish -- hard work, savings and investment, and it will make running family farms and small businesses easier, simpler and more profitable. Moreover, it will eliminate the loopholes, tax shelters and special favors which have corrupted our system so badly.

But it will do more than that. A tax system based on these principles will give Americans back the freedom they've lost to an army of IRS agents, tax lawyers and accountants, and it will promote accountability and responsibility instead of class warfare, envy and hate.

Our flat tax will not merely end the theft and corruption of the current system: it will show every American exactly how much he's paying, and exactly what he's paying for. Armed with that knowledge, Americans will be able to take back the control over government they lost in the 20th Century. When they do, they will bring to pass a new birth of freedom, and an age of hope, growth and opportunity for themselves and their children in the century to come.

Rod D. Martin is a Little Rock, Arkansas attorney, and a fellow of the Kuyper Institute for Political Studies. His Congressional exploratory committee may be found on the web at http://www.theVanguard.org/RMCEC




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