How flat will Rick Perry's flat tax be?
Rick Perry is going to propose a flat tax plan soon. He’s said it’s going to be 'flatter and fairer' than Herman Cain’s signature '9-9-9' proposal, which has been hammered by his rivals.
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But, if you want to raise near the same amount of money as the IRS does now, it is very difficult to design a flat tax system that does not shift at least some of the tax burden off the shoulders of the wealthy and onto those at lower rungs of the income ladder, notes a 2008 Congressional Research Service study of the flat tax and other reform proposals.Skip to next paragraph
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“Any flattening of the tax rates would have distributional consequences across income classes,” wrote CRS economics specialist Jane Gravelle (PDF).
Of course, to many flat tax proponents, that is part of the point of such a system. Nobel prize-winning economist Milton Friedman, the modern father of the flat tax, challenged progressive taxation as inherently unfair.
After all, even under a flat tax, the wealthy pay more, as they have more income, noted Friedman. To increase the percentage of their burden is to use the tax system as a means to redistribute income, in his view.
“This seems a clear case of using coercion to take from some in order to give to others and thus to conflict head-on with individual freedom,” wrote Friedman in his book, “Capitalism and Freedom.”
Liberal economists reject this libertarian view. For one thing, the burdens of supporting society should fall in proportion to the ability to bear them, they argue. For another, a dollar is worth more to the poor, who have fewer of them, than it is to the rich. In this way its value is not constant across income levels, they say.
Will Perry’s proposal help him with GOP primary voters? That remains to be seen of course. But one thing it may do is draw a distinction between him and once-and-current frontrunner Mitt Romney.
According to the Associated Press, in 1996 Romney bought a $50,000 newspaper ad in Boston that said Forbes’ flat tax proposal would primarily benefit the rich. The flat tax “is a bad idea for the Republican Party,” wrote Romney at the time.