Thursday, November 3, 2011

Ramesh Ponnuru, who I wish were wrong, explains why a flat tax fails politically:
[R]eplacing a progressive income tax with a flat tax necessarily means slashing revenues, raising middle-class taxes or both.

Set the new flat rate at a level that can raise as much money as the current tax code and the middle class will pay more. People in the middle of the income spectrum, that is, will have to make up for the sharp fall in rates on high earners. Set it low enough that middle-class taxpayers pay the same as they do now and revenues drop. The only way around this dilemma is to assume that the flat tax will cause an implausibly large boost to economic growth. . . .

The flat tax may seem simple, efficient and appealing, but it’s the fool’s gold of conservative politics.