Exploding Myths of Flat-Tax Proposal

I was disappointed that James Flanigan rather blithely passed on without examination some of the myths that surround the flat tax, a fraud upon the American taxpayer (“A New Tax Structure to Shelter U.S. Savings,” July 2).

I am a retired banker and trust officer who was involved for quite a few years in tax planning, preparation, etc. I have a degree in economics and did graduate work at the Pacific School of Banking, conducted at the University of Washington in Seattle. So I am no kook.

The part of the flat-tax discussion, or lack thereof, with which I take umbrage is the lack of information as to what constitutes the “income” that will be taxed. About half of the hated IRS code that everyone wants to get rid of is devoted to defining income subject to tax.

What I would like to know is what the proponents of the flat tax define as income. If you examine the many types of income that individuals receive, the definition becomes critical in determining who bears the major tax load for the country.

One of the more verbose of the proponents has said that only earned income will be subject to tax, and that does not include municipal or corporate bond interest, dividends on common stocks and capital gains. Left unsaid so far as I have heard are rents, Social Security, pensions, disability payments and many other types of cash flow.

If that leaves only wages and salaries and variations of those, such as consulting fees, then the tax burden will fall mostly on the backs of the working people of the country. Such a definition wouldn’t bother me, as the bulk of my income as a retired person comes from interest, dividends and capital gains. But I do feel for my son and daughter and the rest of the working people who are not yet affluent enough to have any income other than “earned” income.

S.E. CLARKE

Los Angeles