An argument for a flatter federal tax code

While many pundits and prognosticators in Washington are criticizing U.S. Rep. Dave Camp’s tax reform proposal because it would remove too many special giveaways, Barron’s editorial page editor Thomas Donlan makes the opposite argument: Camp’s plan doesn’t go far enough to ensure “what ought to be the main point of tax reform: Every dollar earned should be taxed at the same rate, ignoring who earned it.”

If it’s reform to reduce deductions on mortgage interest, employer-provided health insurance, and interest on municipal bonds, it’s a better reform to eliminate those deductions for every taxpayer. And it’s a better reform to eliminate more deductions, such as pension and retirement-savings contributions.

Camp’s plan also is rife with gimmicks. He fulfills the Republican promise to cut the top rate to 25%, but only by not counting a 10-percentage-point “surcharge” on income above $400,000 a year for single filers. …

… Failing to eliminate the corporate income tax, root and branch, is one of the worst features of the plan. Only elimination of it, with replacement by a value-added or energy tax, can lead American business out of the jungle of loopholes and tax credits. …

… A fundamental problem with recent U.S. tax-reform initiatives, including the Camp plan, the Reagan-era Tax Reform Act of 1986, and most of the hundreds of others offered between them, is that they are as revenue-neutral and distribution-neutral as their sponsors could make them. To do anything really important, they must wait for fulfillment of their sponsors’ promises of accelerating economic growth. …

… Tax reform should start with spending limits, followed up with a new system of taxation that covers the nation’s expenses and pays down the national debt.

No comments yet. You should be kind and add one!

Our apologies, you must be registered and logged in to post a comment.