Flat Tax Proponents Waging an Uphill Battle : Initiative: Group wants to set state tax at 2 1/2% of annual income, with no deductions. Although the concept has attracted much interest, backers are far short of getting the plan on the ballot.
Like many Americans, Roland Boucher has long been irked by complex tax codes. So the Orange County retiree is trying to unleash California’s next great tax revolt--on behalf of a “flat tax.”
Boucher and two associates--who were drawn together by Ross Perot’s unsuccessful presidential campaign--say they have recruited 1,500 volunteers to help qualify a proposition for the 1996 statewide ballot.
Calling themselves United Californians for Tax Reform and operating out of a cramped office near John Wayne Airport, they propose that the state simply collect 2 1/2% of a worker’s annual income. That’s the equivalent of one hour’s wages each week, leading to the group’s motto: “An hour a week is all Sacramento gets to keep.”
The rate also is just a fraction of current state income tax, which can rise as high as 11% for upper-income brackets.
The group is hardly alone in its pursuit of the flat tax. The concept has been embraced by politicians as disparate as Jerry Brown and Bruce Herschensohn. In Washington, several congressmen are pushing various versions of the tax these days. Closer to home, Reagan-era economist Arthur Laffer has been busy drafting a flat tax initiative of his own for the 1996 statewide ballot.
In each case, simplicity is a paramount part of the sales pitch. United Californians for Tax Reform boast that their proposal is so uncomplicated, returns would be filed on postcard-sized forms.
“I think there’s great populist appeal in the idea of a simplified tax form,” said Steve Hayward, research director at Pacific Research Institute, a conservative think tank in San Francisco. “This could become one of the political ideas of the 1990s.”
Backers say a streamlined tax code would give the economy a boost by slashing the cost of tax preparers, accountants and attorneys. Investors, meanwhile, could focus on economic considerations rather than the art of avoiding taxes, they say.
Opponents, meanwhile, say the flat tax favors the rich, who stand to gain with lowered rates, and would limit government’s ability to handle emergencies.
“It’s a can of worms,” said Sen. Leroy Greene (D-Sacramento), chairman of the Senate Revenue and Taxation Committee. “They’re saying we know everything that’s going to happen, every cost to the state, and that’s not the case. What about the Medfly, the occasional riot, earthquakes?”
Greene also says that trying to revamp the state tax system via the initiative process is fraught with peril. Instead of going through “the crucible” of countless Legislative hearings before experts, initiatives are the product of only a few minds, he said, and “the odds are they got it wrong.”
A review by the state legislative analyst concluded that the proposal by United Californians for Tax Reform could cost $179 million each year in lost revenue. The group insists that the loss--roughly 1% of the more than $16 billion in income taxes now collected by the state--would hardly bankrupt California.
To help ease the transition from the status quo, an additional 2 1/2% would be assessed for the first five years on individual income over $52,000.
Boucher, a former aerospace manager, said he became frustrated with the tax system after he launched a business in the 1970s selling radio-controlled toy cars. “Every person making an equal income ought to pay equal taxes,” he said. “That means no deductions, credits, exemptions. Nothing.”
But he and his cohorts--Paul Arndt, who worked with Boucher at Hughes Aircraft and is now retired, and real estate manager Chuck Alvord--are having a rough time revving up their campaign.
Despite the corps of volunteers and a snappy phone number--(800) 540-FLAT--United Californians for Tax Reform has collected only 50,000 signatures for the measure, far short of the 376,000 they need by the end of September to qualify for the ballot.
The group also is short on cash, and they haven’t it hasn’t even been able to get an endorsement from United We Stand, the grass-roots group formed by Perot followers. “We’ve been ignored,” lamented Boucher.
If Boucher’s tax plan makes the ballot, it would likely end up in competition with the proposal being sculpted by Laffer. His idea, similar to the proposal pushed by former Gov. Brown during the 1992 presidential race, is to eliminate all taxes--everything from property to income taxes--and replace them with a flat tax that would be the same for individuals and business.
The proposal is still being tinkered with, but the idea is to ensure that taxes collected by state and local government remain at 10.71% of the personal income of California residents. Laffer’s plan also allows a few exemptions--donations to charities, mortgage interest or rent payments, and disability and Social Security income.
While the Orange County group is struggling to collect signatures, Laffer has joined forces with an old hand at ballot measures--People’s Advocate Inc., the direct-mail group created by the late Paul Gann, co-author of Proposition 13. Laffer said more than $400,000 has been raised for the signature-gathering, which has yet to begin.