Saturday, June 26, 2010

Machiavellian Defense for a Flat Tax


There are a lot of different ideas for tax code reform supported by libertarians. Flat tax. Fair tax. No income tax at all. And all of these proposals are opposed by some libertarians as well. It's a tough issue. Do we improve this system we rail so loudly against through some sort of gradualism? Or does supporting one of these "slightly better" systems mark us as supporters of legalized theft?

Now, most of the arguments for tax reform stem from some semblance of "fairness". A progressive tax code isn't fair because it punishes the best and brightest. And our present tax code is also so confusing that only those who can afford good lawyers can get around it.

Let's think pragmatically about what some sort of flat tax would encourage.

The government is always looking to increase their tax revenue. They expect budget increases the same way you expect a small salary bump at your yearly review - regardless of the fact that your company lost business and cut employees this year. You want it. You expect it. And so do they.

But with a flat tax, they can't just pick on the winners anymore. In order to get more revenue, their best tactic would be to incentivize overall growth. Lower trade barriers. Lower the costs of doing business. Encourage real growth.

They win. We "win". The pragmatic in me wants it. The cynic in me knows that even if it passed, they'd create new "excise" taxes to take more from the winners. The flat tax might not stay flat for long.



By: Eric Olsen, Regular Columnist
Articles | Author's Page | Website