In a previous piece entitled The Ides of April, I talked about the economic stimulus brought about by tax rate cuts enacted during the John F. Kennedy (elected in 1960) Administration… and the Ronald W. Reagan (elected in 1980) Administration… and the George W. Bush (elected in 2000) Administration. Each time, these tax cuts brought about reversals of less-than-stellar economic conditions. And each time, these tax cuts resulted in more tax money collected than the amount of the cuts themselves.
“But why”, I’ve been asked “if tax cuts are so good for the economy, did we have to cut taxes again twenty and then forty years later? Why didn’t they keep on working?”
They would have… except that after the cuts, both voters and politicians reverted to their previous behavior. The voters went about their business of earning a living and providing for their families, and not keeping an eye on the politicians. And, once the heat was off, the politicians started fiddling around with the tax code again – adding incentives, disincentives, favors, penalties, and raising tax rates.
Every year, the Tax Foundation calculates “Tax Freedom Day” – that day when freeborn Americans have earned enough money to pay their combined federal, state, and local taxes. Tax Freedom Day was April 18 in 2003, but has crept up to April 19 in 2004, April 26 in 2005, April 28 in 2006, and April 30 in 2007. That’s an additional 12 days since 2003 required to pay your taxes!!
But that’s not all. Even with the recent tax cuts, the tax code is still over 60,000 pages long – and growing every year! The IRS has nearly 600 forms! The “Short” 1040 form comes with almost 100 pages of instructions. The IRS itself estimates that filling out the “Long Form” 1040 takes the average taxpayer 27 to 44 hours! Nationwide that amounts to 6.4 Billion hours!!
All these are among the reasons Senator Arlen Specter has introduced the “Flat Tax Act of 2007” (S1081). I talked to the Senator’s office and was told that “Senator Specter’s flat tax legislation will fundamentally revise the present tax code with its myriad rates, deductions and instructions, and will make filing a tax return a manageable chore, not a seemingly endless nightmare.”
This bill would:
- Scrap most of the current tax code, and eliminate its myriad regulations
- Establish a 20% flat tax for all individuals and business
- Allow only two deductions: mortgage interest and charitable contributions
- “Allow tax payers to file returns on a postcard that could be completed in 15 minutes”
The Flat Tax supporters emphasize three advantages:
- Dramatically simplify the payment of taxes.
- Remove much of the IRS regulatory morass and allow taxpayers to devote more of their energies to productive pursuits.
- Rewards saving and investment, and spur economic growth as more money flows into investments and savings accounts.
Now the good Senator’s staff knows I vehemently disagree with some of his positions. But I fully support this bill and, in spite of the current political climate, have let my own Senators and Congressman know that I expect them to support it too. I also asked my Senators to sign on as co-sponsors of the bill.
An interesting short discussion of the Flat Tax can be found on the Adam Smith Institute site here. Anyone with more time on their hands, and would like an “education in depth”, can view their longer (and dare I say even more interesting) paper here.