![]() But I’m afraid they’ll discover some “temporary” emergency reason to keep the income tax, followed by another “short-term” excuse. I can envision the crowd in Washington adopting a national sales tax (or VAT) while promising to phase out the income tax over a couple of years. That being said, I do have a couple of qualms about the Fair Tax and other national sales tax plans.įirst, I don’t trust politicians. The flat tax takes a bite of your income as it is earned and the sales tax takes a bite of your income as it is spent. The only real difference is the collection point. Dramatically downsize and neuter the IRS by replacing 72,000 pages of complexity with simple post-card sized tax forms.įor all intents and purposes the flat tax and sales tax are different sides of the same coin.Elimination of all loopholes (other than mechanisms to protect the poor from tax) to promote efficiency and reduce corruption.No double taxation of saving and investment since every economic theory agrees that capital formation is key to long-run growth.A single (and presumably low) tax rate, thus treating taxpayers equally and minimizing the penalty on productive behavior. I pointed out the flat tax and sales tax (and even, at least in theory, the value-added tax) all share very attractive features. My modest contribution was to present “The Case for the Flat Tax,” and I was matched up – at least indirectly, since there were several hours between our presentations – against former Congressman John Linder, who gave “The Case for the Fair Tax.” I’m glad to be here, both because Hillsdale proudly refuses to take government money (which would mean being ensnared by government rules) and also because I’ve heard superb speeches by scholars such as Amity Shlaes (author of The Forgotten Man, as well as a new book on Calvin Coolidge that is now on my must-read list) and George Gilder (author of Wealth and Poverty, as well as the forthcoming Knowledge and Power). The event is called “ The Federal Income Tax: A Centenary Consideration,” though I would have called it something like “100 Years of Misery from the IRS.” I’m at Hillsdale College in Michigan for a conference on taxation.
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