Debate Over Flat Tax
* Re “It’s a ‘Flat’ Year for Tax Reformers,” editorial, Jan. 21: Everyone seems to ignore the fact that the flat tax is not flat. All of the so-called flat-tax proposals rely on a two-tier income bracket system in which the lower bracket pays a 0% rate and the upper bracket some percentage, usually under 20%. The principal difference between these new taxing schemes and our beloved IRS taxes is that the new ones would be less progressive and flatter--but not flat.
Critics who say the flat tax will hit some middle-class taxpayers are absolutely correct. This really leaves tax reformers few options other than abolishing income taxes entirely and replacing them with consumption taxes. Such a tax could take the form of a national sales tax or a value-added tax and could be designed to be effectively “progressive.” Since Congress and the president cannot be trusted to make such reforms and keep them in place, we need to do it by repealing the 16th Amendment to the Constitution--the one that gave us the income tax.
DAVID V. ANDERSON
* You stated a goal to eliminate “myriad loopholes.” It will never happen. Let me illustrate: Republicans, of all people, oppose the administration’s proposal to scrub a tax break for citizens working overseas. Indeed, Rep. Bill Archer (R-Texas) wants to increase the nontaxable income from $70,000 to $100,000! Cherchez la campaign contributions! Major beneficiaries are Texas oil companies. They argue that the break increases “jobs” and income. Of course! But to the detriment of others--particularly most taxpayers.
Assume, however, that a “flat tax” is enacted that eliminates “loopholes.” Campaign donors would accomplish the same by, say, subsidies, in effect putting “bends” in a “flat tax.” There is no legislation--with the possible exception of campaign finance reform--which will reduce special-interest tax breaks.
* In discussing taxation of dividends and wages, Robert Kuttner (Commentary, Jan. 21) correctly notes that an argument for not taxing dividends is that the corporation has already paid taxes on the dividends and that the same income should not be taxed twice. Kuttner then goes on to commit the taxation error of the month by stating “wage and salary earners also collect income that has already been taxed once.”
Nothing could be further from being correct. Wages paid by an employer are deductible to the employer and are not taxable to the employer.
GORDON L. PETERSON
* With all the talk of a “flat tax,” nobody has called it for what it is, a tax on the money earned by the sweat of your brow. In some proposals income derived from investments or savings is not taxed. All of the proposals, however, do impose taxes on the money earned in the workplace.
This is patently unfair. It comes down to a question of which has more value, the labor that produces the goods or the money that is invested to produce goods. If you believe that both investments, sweat and capital, are necessary, then the worker is still getting the raw end of the deal. The worker’s investment is not seen as equal to the investor’s.
The only tax system that is fair is a progressive tax system that closes all the loopholes. Let’s simplify our tax laws and do away with all the regulations that make our tax system such a burden. If everybody paid their fair share then the tax rate could be lowered and nobody would miss their untouchable deduction, except the people who now do not pay their fair share.
STEPHEN W. REPASKY