Arnold Kling  

Single Tax Rate

Hurricanes and Broken Windows... Poverty and Social Pressure...

Alan Reynolds argues that many problems with tax systems go away if you use a single tax rate.

First, a single tax rate makes it much easier to integrate business and individual taxes. Income originating in business (and used to pay interest and dividends to investors) can be taxed at the business source, rather than distributed to individuals and taxed at different rates depending on what their annual salaries happen to be that year.

...a single tax rate is inherently more stable, not so tempting for politicians to change. Adding a "surtax" at higher incomes would be a conspicuous violation of the rule, as would adding additional tax brackets.

The latter point relates to an idea that I am concerned with--how to keep Congress committed to tax reform once it has been enacted.

For Discussion. Reynolds and others would favor very dramatic tax reform. Is there a case for incremental tax reform instead?

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COMMENTS (3 to date)
skh writes:

Incremental tax reform has contributed greatly to the 8 million+ pages of tax code now on the books. The politicos begin with (perhaps) good intentions, but the end result is a more convoluted system of loop holes and exemptions than ever. While that's good news for CPAs and tax lawyers, I believe that a broad overhaul of the tax system would be the only way to produce meaningful reform.

Lawrance George Lux writes:
Reynolds and others would favor very dramatic tax reform. Is there a case for incremental tax reform instead?

No. Congress has been trying to fix the Tax system since implementation of Income Tax, and look at the lobbying for tax advantage. The need is for a clear and simple, appliable Tax Code which Everyone will be opposed to amending. lgl

Joe Kristan writes:

In theory, there is of course no case for not having a perfect tax system, whatever that is. In reality, you need 60 votes in the Senate. If the incremental reform is an improvement over the existing system, and fundamental reform can't pass, then you fix what you can.

Pulling weeds improves your garden, even though you know weeds grow back.

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