Flat Tax Analysis

The ideas of Karl Marx are alive and well—in the U.S. tax code. One of the planks of the Communist Manifesto, which states the conditions necessary for a transition from a capitalist to a communist society, is “a heavy progressive or graduated income tax.” A progressive tax system is one in which the tax rate increases as the taxable amount increases. Since the permanent adoption of the income tax in 1913, the United States always has had a progressive tax system...

The Economic Growth and Tax Relief Reconciliation Act of 2001 established the current tax brackets of 10 percent, 15 percent, 25 percent, 28 percent, 33 percent and 35 percent. This progressive system results in Americans who earn the top 5 percent of income paying about 57 percent of the income taxes...

Unfortunately, tax reform plans usually focus exclusively on simplification of the tax code rather than on making the code less progressive. And, even worse, no major tax reform plan even hints at lowering America’s overall tax burden.

The most radical tax reform plan is a consumption tax in the form of a national retail sales tax called the FairTax. The FairTax has been introduced in the U.S. House of Representatives by John Linder (R-GA), and is promoted heavily by Atlanta radio talk show personality Neal Boortz. The FairTax would replace with a national sales tax not only the personal income tax, but also the corporate income tax, estate tax, gift tax, unemployment tax, Social Security tax and Medicare tax. Additionally, every family in America would receive a monthly rebate to offset the taxes paid on basic necessities...

The tax reform idea that has been around the longest is the flat tax. Under a flat tax, there are no tax brackets—everyone’s income is taxed at the same rate—and generally without deductions..

Although it is certainly true that the current U.S. tax system is too complex, too confusing and too intrusive, what really needs to be flattened is skyrocketing congressional spending, not the procedure used by the government to extract the wealth of its citizens.

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