I need to qualify myself here before I get too far. The flat tax, the idea that we’d assess the same tax rate to Warren Buffett that we do to the average part-time Walmart employee, no. I’m more in favor of what I hear called a fair-tax system that would set one higher rate for higher-income Americans, another for middle-income wage-earners and then a third rate for lower-income folks, with the other key defining feature to the system being the elimination of deductions.
Before you get too riled up about the loss of tax deductions, consider how much we pay in compliance costs. Small businesses (under $1 million in assets) pay close to $4 in compliance costs for every dollar of actual taxes paid. (Yikes!) Throw in the regressivity for low-wage individual taxpayers, who pay a much higher percentage of their income to comply with the tax code as higher wage-earners, and you see the pattern that disturbs me: Working- and middle-class families and small-business owners are spending too much on tax compliance for our economy’s good.
It does bother me that those who wage class warfare on behalf of the superwealthy have hijacked the flat-tax/fair-tax issue to be about reducing their already diminished contibutions to the public welfare. That should bother any of us who consider ourselves to be among the so-called 99 percent. Flat tax, fair tax, tax simplification, whatever you want to call it, only makes sense by reducing the burden on the classes that drive our economy – working- and middle-class families and small-business owners.
An added bonus: We all benefit by redirecting the money and brain power currently dedicated to tax compliance to other parts of our social and economic life.
Column by Chris Graham