As I read Amity Shlaes’s Time op-ed on the “flat tax”, I began to wonder how the term took hold. It’s a misnomer, a great marketing job.
As the Republic was originally constructed, truly flat taxes also called “head taxes” were all that the federal government was empowered to levy on individuals or companies. We had to amend the Constitution to levy an income tax under which individuals paid at the same rate or at graduated rates as it is now.
I guess that’s the derivation of the term, from “flat rate”. But it’s not a flat rate. If you don’t believe me, draw a horizontal line on a piece of graph paper. Label the vertical axis “Tax” and the horizontal axis “Income”. Now take another piece of graph paper, label the axes the same way, and draw a line at a 45° angle. When we say “a prairie is flat” or “my backyard is flat” or even “my rear tire is flat” which do we mean? I think we mean the first one. A flat tax is only flat from a second derivative perspective which is what makes it great marketing.
That brings me to another word that has been twisted out of all recognition: justice. We used to refer to a “just scale” meaning that the scale balanced, i.e. when you put objects of the same weight on each side the scale didn’t tip one way or the other. Nowadays rather than meaning objective balancing it’s transmogrified into meaning subjective balancing. Something other than a head tax is just if you assume that each incremental dollar is less important to you than the last and, at some point, that dollar increment is completely meaningless to you. I don’t think that’s the case. Quite to the contrary I think it’s merely expedient.
I would further claim that arriving at subjective justice is futile. It can’t be done.
Don’t get me wrong. I’m not arguing in favor of a head tax. You can’t maintain a modern society on the basis of a head tax and it’s quite possible that you can’t maintain one on the basis of a tax in which everybody pays at the same rate (presently called, in a blaze of marketing genius, a “flat tax”), either. You’d have to sit down and do the math and our politicians are notoriously math-averse.
Applying the premise that if you tax something you get less of it, I think that taxing work and income are bad ideas in today’s society and we’d be better off taxing consumption (especially if the first inflation-adjusted $20,000 of spending were exempted), an idea that even Republicans are beginning to come around to.
Thanks for reading Shlaes so that no else needs to do so. In principle, i think I support a consumption tax, but I would really like to see how it would work out in how much would be paid, and who pays it. Using your 20k exemption I am guessing this just means the poor pay no (consumption) tax, the middle and upper middle pay at rates in the 20%-30% range and the very wealthy in the 2%-5% range. As we know, making the wealthy more wealthy doesn’t necessarily help the economy, and has caused major harm in the past.
Query- If taxing something means you get less of it, do you think folks in the 40k range reduce consuming with a consumption tax? I doubt it actually changes their spending habits much. What income group would really reduce their consumption?
Steve