THE U.S. TAX CODEIS HIDEOUSLY and needlessly complex. People say they want something simpler. Now two Republican presidential candidates are probably committing political suicide by offering people what they say they want.
The central gimmick of Fred Thompson's recently announced tax plan is to offer people a choice. They can pay taxes under the current rules -- with some juicy new breaks added from the big- and small-businesses wish lists -- or they can pay a so-called flat tax, with lower rates and fewer deductions. So anyone who wants a simpler tax code could have one. But for people who get a lot of deductions now, the simpler tax would be a higher tax. How many people, do you suppose, would choose simplicity over complexity, even if simplicity would cost them more? My bet: approximately zero.
Like most flat-tax advocates over the years, Thompson puts a thumb on the scale by combining flatness with a large tax cut. The Congressional Joint Committee on Taxation figures that Thompson's plan would fall a mere $2.5-trillion short of revenue over the next decade, compared with the current system. If you can borrow $2.5 trillion, it makes it easy to arrange for more people to see their taxes go down than up if they choose the flat-tax alternative.
But this has nothing to do with simplifying the system. If you don't care how much debt you run up, you can give everyone a tax cut without bothering about simplification. You can stop collecting tax at all! That would be nice and simple.
Monday, December 10, 2007
Michael Kinsley, in the Los Angeles Times: