Comments: We Already Have a Flat Tax

Marginal rates. MARGINAL. Even I, versed in such things and reading past three mentions of the term, interpreted the conclusion as a flat tax. (Well, maybe since that's what you and Greg called it, but it ain't. A flat tax is the same rate for every dollar taxed, no? Thus the name "flat?"

Here's the fudge factor: "...along with a universal lump-sum grant..."

There's why your simplified tax code is such a high hurdle. Imagine if a single dollar figure could be attached to the amount of tax dollars (other people's money) redistributed by government to "the average household." How many fewer votes would this earn? Better yet, how many fewer would accept the largesse?

No, far better for the political class to keep those figures in the shadows.

Posted by johngalt at November 19, 2012 2:54 PM

Indeed, consider one of the contributors to the mythical low-income marginal tax rate from the CBO report:

Reduction of SNAP Benefits. For recipients, the reduction in benefits that occur as income rises adds an average of 25 percentage points to their marginal tax rates.

While true in the aggregate, calling the reduction in welfare payments as earnings increase a "tax" is a practice that further obliterates the meaning of the concept of "earned wealth."

Posted by johngalt at November 19, 2012 3:08 PM

Marginal rates are the most interesting. If you believe that incentives count, the tax on the next dollar of income is what matters. (Dr. Yoram Bauman, the Stand Up Economist says "You might be an economist if you add 'at the margins' to the end of every fortune cookie.")

Mankiw suggests that a flat tax could replace the current system with a simple rebate/negative credit. Methinks you and he are arguing about the size or existence of the "universal lump-sum grant" but that we might all agree on the flat tax component.

Posted by jk at November 19, 2012 5:01 PM

In general I am a proponent of lower marginal tax rates, even if that implies higher average tax rates. Nonetheless I feel obliged to urge caution in advocating a more efficient tax system. As Gary Becker, James Buchanan, Casey Mulligan, and others have emphasized, a more efficient tax system can lead to bigger government.

Posted by EE at November 20, 2012 9:56 PM

I seek transparency. Even if I have to give them efficiency, I will trade it for the hidden social engineering they can currently do with the tax code.

Posted by jk at November 21, 2012 11:12 AM
Post a comment

Remember personal info?