Why we need a flat tax now more than ever.

(cross posted at Partisan Report)

A simple remedy to alleviate the nuances that define the tax debate is needed. We can find it in a simple and effective solution, the Flat Tax. We wouldn’t have to witness the un-American tactic of pitting one class against the other or singling out one group of wage earners in discriminatory fashion.

This year’s Presidential Election has brought out a major fundamental debate in America and that is, of course, taxes. But, even that statement doesn’t do justice to the debate. It’s not simply just taxes but a whole list of categories and sub-categories of taxation being discussed. Income tax, capital gains tax, corporate tax, pay roll tax, death tax, exemptions, credits, deductions, etc., etc. And of course who gets taxed more and what should the government tax, and to what excesses?

In actuality what is being witnessed are two candidates arguing policy differences about the same flawed tax code and within its parameters. Here are but just a few examples.

Barack Obama has made headlines with his calling for income redistribution or, “spreading the wealth around.” He points out the gap between rich and poor and the differences in disposable income have shifted America dangerously towards third-world status.

McCain is calling for middle-class tax breaks and lowering of the corporate tax to entice business and investment. He points to the lukewarm economy and jobs have moved over seas to more business friendly countries.

Despite the effort, neither proposal is what we need.

Obama will use the tried and failed policies of tax and spend. He’ll create revenue through unfair and burdensome taxation to pay for extravagant and costly government expansion programs. He’ll cite that the programs – cradle to grave social welfare agencies – will offer assistance to those who couldn’t otherwise afford them. The question is, at what cost to business, wealth, growth and to the country?

McCain on the other hand, will continue to empower the very rich to control and manipulate the tax system and find special breaks and havens. Obviously, this is something that smaller businesses and less wealthy individual payers can’t do. And will continue to borrow and spend mortgaging away our future.

Which ever side wins out the system is flawed and anything but fair no matter whom you help, attack, reward or punish.

A simple remedy to alleviate the nuances that define the tax debate is needed. We can find it in a simple and effective solution, the Flat Tax. We wouldn’t have to witness the un-American tactic of pitting one class against the other or singling out one group of wage earners in discriminatory fashion.

We wouldn’t have to suffer the loss of jobs as corporations move over seas – much less debate the issue of what the tax should be at. We would stop punishing those who add to the wealth of the country, eliminate the bias against savings and investment and level the playing field for American industry to become competitive in an expanding global market.

The crazy and purposely misleading complexities to numerous categories in our tax code can be replaced with a simple single tax rate of 20%. This is the fairest way to eliminate the attacks on the rich and entrepreneurship while greatly empowering the lower income earners to save and climb the economic ladder. Because by eliminating the death tax, capital gains tax, payroll tax and, most importantly, by taxing income only one single time job formation and capital formation in greatly increased.

Dale W. Jorgenson writing for Harvard Magaizine came up with hard numbers to confirm the economic prosperity created by a Fair Tax principles.

I estimate that gains from Efficient Taxation of Income would be equivalent to 19 cents for every dollar of U.S. national wealth. The total gains would be a whopping $4.9 trillion! By comparison, the nation’s gross domestic product was $8.1 trillion and national wealth was $25.4 trillion in 1997, the base year for this comparison. These gains encapsulate the benefits of shifting investment to higher-yielding assets. They also reflect greater investment and faster economic growth.

Instituting the new investment tax credits would stimulate investment, especially in the corporate sector. The revival of economic activity would raise earned income from work and property-type income and would stimulate consumption. And Efficient Taxation of Income would have a much greater impact than a revenue-neutral version of the flat tax. I estimate that the flat tax would yield $2.1 trillion in new national wealth—only about 40 percent of the gains attainable from Efficient Taxation of Income.

The duplicity of the tax code where numerous forms of taxation exist creates cheating by the rich while exploiting the rest. The Flat Tax eliminates all the nonsense by paying once at a fixed rate on their labor income. There will be no dividends or business and capital income to report. Businesses themselves would report that at the business level. Again, one tax, only one time, no double taxation.

With the concept of fairness, the debate of healthcare affordability, a lagging economy and the Federal Governments role in the economy to contend with, the Flat Tax is the only answer. Not a carefully written and complex tax structure that rewards those who can manipulate it and at the same time punishes success. By paying lower one time rates across the board by the individual and businesses, the economy’s performance and the buying/saving power of the consumer will increase.

The entire principle it self is one of fairness and efficiency. It replaces the discriminatory model that is currently in place that hurts growth, weakens the dollar and buying power of the consumer, and makes American businesses less competitive when compared to the global market. Consequently, the Fair Tax naturally limits the government’s role over the lives of the taxpayer and the economy. The revenue generated will still be created needed to run the federal government and programs, but will do it in a way that prevents micro-management and intrusion into the private sector and lives.