Does anyone remember when the NYT and Democrats favored a flat tax?
https://www.nytimes.com/1982/06/06/opinion/yes-there-is-a-better-income-tax.htmlOpinion
Yes, There Is a Better Income Tax
June 6, 1982, Section 4, Page 20
As many Americans keep saying, it's a poison in the body politic. Who can respect an income tax system that allows many wealthy citizens to pay little or no tax yet claims close to half the marginal earnings of the middle class? Who can defend a tax code so complicated that even the most educated family needs a professional to decide how much it owes?
Unpopular as it is, however, the income tax system has been remarkably resistant to improvement. President Reagan's tax package will eventually roll back rates to the level of the late 1970's, but it will not simplify the code or rid it of provisions that penalize hard work and reward unproductive investment. No wonder that skeptical politicians rank serious tax reform with gun control and free world trade - as worthy causes unworthy of the time of realists.
The skeptics may yet be proved wrong. The obstacles to reform are no less daunting than they were a decade ago. But Congress is beginning to see that the public's tolerance is not unlimited; disaffection is great, cheating has increased. If any reform has a chance, it is the fresh start proposed by Senator Bradley of New Jersey and Representative Gephardt of Missouri.
Federal income taxes now claim only 12 percent of all personal income. But the income base that is taxed has been so eroded by exceptions and preferences that the rates on what is left to tax must be kept high. Thus, the tax on an extra dollar of income for a typical family earning $20,000 is 28 percent and progressively higher for the more affluent. The urge for reform, therefore, usually attacks the most egregious exemptions in the code, to exploit popular resentments and to enlarge the tax base.
But a diffused public outrage has been no match for well-funded special interests. So a new generation of reformers aims to rebuild the income tax base from scratch. It hopes to simplify the tax code and sharply lower the marginal tax rates for all.
The most dramatic fresh start, without changing the total amount collected, would be a flat-rate tax levied on a greatly broadened income base. Senator Helms of North Carolina would rid the law of virtually every tax preference and tax all income at about 12 percent. Representative Panetta of Cali-fornia would retain a few preferences and tax at a flat 19 percent. Either approach would greatly improve the efficiency of the system, simplifying calculations and increasing the incentive to earn. But the price of simplicity in such a flat-rate tax is an enormous redistribution of income.
According to the Congressional Budget Office, Mr. Helms's plan would raise the burden on those earning $5,000 to $10,000 by 147 percent - while decreasing the total paid by families in the $100,000 to $200,000 range by 47 percent. Mr. Panetta would fully protect the poor but would still be increasing the burden on middle-income families.
Lacking this radical simplicity, but preserving the present balance of pain, is the Bradley-Gephardt plan. It would continue to permit a few politically sensitive deductions, like home mortgage interest and contributions to charity. But more affluent families would pay a surcharge on these preference items. Also, the marginal tax rate would increase with income, topping out at 28 percent for those earning more than $37,000.
Unlike a flat tax, Bradley-Gephardt would thus not mix tax reform with redistribution: no income class would benefit at the expense of any other. But dozens of tax exemptions would be eliminated; most would pay tax on almost all types of income. The average citizen could thus figure his own taxes and figure that his neighbor was also paying a fair share.
Neither a flat tax, nor a sophisticated hybrid like Bradley-Gephardt, would be easy to enact. Hardly anyone objects to the idea of simplification; but almost every voter aims to protect a favorite piece of tax-exempt turf. Investors want preferences for capital gains; working parents want deductions for child care; Americans abroad want foreign income exclusions, and so on. All exclusions can find their justification. But by cumulatively narrowing the tax base, all contribute to making the income tax code a disaster.
The issue, then, is whether Congress can muster the vision to look to the common interest. The hurdles are formidable, but so are the potential benefits: a return to fairness and faith in a system that lies at the heart of responsible government.
A version of this article appears in print on June 6, 1982, Section 4, Page 20 of the National edition with the headline: Yes, There Is a Better Income Tax.
