Tuesday, January 25, 2005

"Flat Tax" = Work Tax

Here’s an idea: we can eliminate bank robbery from society if we just require banks to hand money to anyone who asks for it.

Ridiculous, right? Yes, but no more so than the idea that we can elminate tax dodging by creating a work tax (also known as a “flat tax”). It’s a solution that doesn’t solve the problem; it simply labels the problem a “solution” and declares victory.

Mark Hyman, usually one to trumpet the wonders of the American economy (and everything else) as superior to anything across the Atlantic, has
suddenly found something he likes about the former communist countries of eastern Europe: the so called “flat tax.” If these fledgling democracies are doing it, shouldn’t we?

No, we shouldn’t. A work tax sounds good when it’s labeled “flat,” but it’s a regressive tax that benefits only the wealthiest people who make money by investing rather than actually working. It’s no wonder that the best known advocate of the work tax in America is Steve Forbes, one of the richest men in the nation. The amount of tax Forbes would pay under his own proposed work tax? Nothing.

Think of it this way: who can better afford giving up 20% of their income, someone who makes $25,000 a year or someone making $200,000?
The same tax rate takes a bigger effective bite out of those making less.

We’ve pointed out in this forum before that progressive taxation, in which those who benefit the most from living in a free society contribute more to its upkeep, is as old as democracy itself. Hyman picks some special cases of countries who have enacted the work tax without noting how different they are from the U.S. Most of the countries he cites have universal health care coverage and a host of other government-provided safety nets. We don’t. Also, these small countries benefit from their membership in the larger EU community of nations to help prop up their economies as they grow. The U.S. has no such fiscal crutch. On a more common sense level, where you want to live: the U.S. or Estonia? One might want to look at the end result of a tax system before pronouncing it an economic wonder.

No one loves to pay taxes, but they’re they main way most of us serve our country. Those who advocate the work tax like Hyman are trying to shirk their duty to the nation while cynically selling their right to do so by
misrepresenting the tax as “fair.” Given how often he cloaks his opinions in his supposed love of our troops in Iraq and Afghanistan, one would think Hyman would be more willing to do his part to help out Uncle Sam (partiuclarly given how much easier it is to fill out a tax form than it is to go on patrol in Fallujah), but perhaps we’ve overestimated him.

And that’s The Counterpoint.


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