The flat tax: The GOP's cure for what ails the country

Once upon a time, said Michael Tomasky in TheDailyBeast​.com, the concept of a single, across-the-board income-tax rate was the province of “messianic loons” on the far Right. Now it is “getting ever so closer to becoming GOP dogma.” Last week, Rick Perry tried to jump-start his flagging presidential campaign with a proposal to replace the current, Byzantine tax code with a “simple,” 20 percent flat tax. (His plan is actually not so simple, since it allows people to file under the old tax code if they prefer.) His rival Herman Cain has already proposed a “9-9-9” tax plan, with a flat 9 percent tax on personal income and businesses. Even Mitt Romney, who in 1996 denounced the flat-tax proposals of then-candidate Steve Forbes as a tax cut for “fat cats,” was quoted this summer as saying, “I love a flat tax.” The flat tax is an idea whose time has come, said Louis Woodhill in Forbes.com. With the U.S.’s economic growth at a standstill, we need “drastic change.” A flat tax would free U.S. businesses from the onerous 35 percent corporate rate, and trigger the economic boom that we desperately need.

The “flat tax is a flat-out fraud,” said Robert Reich in the San Francisco Chronicle. Out of simple fairness, our tax code has always required the rich to pay a greater percentage of their incomes than the poor. The effect of “flattening” those differences would be to give massive tax cuts to the wealthy and corporations, while raising taxes on the poor and lower-middle class at a time of rising inequality. Under Perry’s plan, for example, billionaire investor Warren Buffett would see his tax bill slashed from $6.9 million to a paltry $120,000. Cutting taxes this drastically would have a staggering impact on federal revenues, said Brooks Jackson in USA Today. The nonpartisan Tax Policy Center found that Perry’s plan would reduce federal revenues by between $570 billion and $1 trillion in 2015.

Those projections are meaningless, said The Wall Street Journal in an editorial. They assume the economy would be the same size with or without a flat tax, but a flat tax would spur rapid economic growth—and thus actually increase federal tax revenues. Does anyone seriously think that reducing the corporate rate to 20 percent wouldn’t “attract more capital from abroad, encourage more domestic investment, and increase growth and jobs?” Other benefits would be far more profound, said Michael Walsh in the New York Post. With a flat tax, politicians would no longer be able to reward their cronies and contributors with loopholes and tax breaks. Better still, it would strengthen the social fabric by requiring everyone, irrespective of wealth or income, to “pay something, even if it’s only a pittance.”

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Are my fellow Republicans bent on political suicide? said Ross Douthat in NYTimes.com. If the GOP thinks it’s going to regain the White House by telling American voters that “their own taxes should go up to pay for a tax cut for the top 10 or 5 or 1 percent of earners,” the party has gone even further into its ideological fantasyland than critics contend. Don’t worry—none of the flat-tax plans are meant to be taken seriously, said Bruce Bartlett, also in NYTimes.com. Perry is just using his flat-tax proposal as a “signaling device” to prove to the Republican base that he’s more conservative than Romney. As a tax plan, it’s a nonstarter, but as a political stunt, “it might just work.”