GOP Flat-Tax Proposal

* Re “GOP Panel Calls for Switch to Flat-Tax System,” Jan. 18:

The GOP’s embrace of the flat tax is puzzling, because the flat tax is antithetical to many of the goals the GOP is pursuing.

Like Reaganomics, the flat tax is based on the hope that lower taxes will spur an increase in economic activity and hence an increase in overall revenue. But the magnitude of the proposed cuts is huge; in order to maintain revenue, the economy would have to grow at a torrid pace, entailing very high (probably double-digit) inflation. If the economy doesn’t grow at such a rate, we’ll face enormous deficits. High inflation or huge deficits: Which will it be?

A more subtle problem with the flat tax is municipal bond interest rates. Because the interest paid by municipal bonds is currently tax-exempt, they pay below-market rates. But if all investment income becomes tax-exempt, municipal bonds will be forced to pay higher, market interest. This means higher taxes at the state and local levels, or fewer bonds issued. Fewer bonds means fewer jails, roads, schools--and jobs. Higher taxes and fewer jobs: Was this in the “contract with America”?

The flat tax is bad news for Democrats and Republicans alike, and we should all oppose it.

PAUL YAMASHITA

Castaic

* As long as Steve Forbes, Dick Armey, Jack Kemp and others define tax reform in terms of a flat tax, let me suggest real reform. Let’s keep Armey’s simple postcard tax return: Include all income (dividends, interest, capital gains, wages), no deductions or exemptions--and a flat tax of 50% on incomes above $150,000 per year. What could be simpler?

Think of how my plan would grow the economy--all those dollars left in the hands of former taxpayers who would then buy cars, computers, etc. Instead of using their accumulated profits to buy up other corporations, downsizing and accumulating more profits, businesses would increase production to meet the new demand for their products, hire more workers, increase wages, create more demand and we would achieve Utopia in a free market!

Is it too late for me to run for president?

ROBERT “BOB” BERTHOLDO

Agoura Hills

* Re “German Union Forges Plan for Creating Jobs,” Jan. 13:

In stating that the U.S. “unemployment rate stands at a relatively attractive 5.6%,” you imply that this country is doing its bit to help the unemployed.

Every day it appears someone is downsizing and laying off employees. Will someone please answer truthfully how this government ends up with rosy unemployment figures, which drive the stock market?

Is it not true that only persons receiving unemployment checks are considered unemployed? That those who have not found a job and have run out of the 26 weeks of unemployment checks are not considered as unemployed and are left out of the formula that paints rosy pictures?

I have been out of work for three years. Not for lack of trying. I am not considered unemployed.

LEO A. SHILLONG

Anaheim