Most Americans would prefer to pay a flat-rate income tax -- and they may get that chance, now that someone has come up with a clever way to overcome the objections of special interests.
"The vast majority of taxpayers and economists agree that a simple flat-rate tax system would be vastly superior to the 5.5-million-word Internal Revenue Code we tolerate today," observes Stephen Moore of the Cato Institute. "Yet the political obstacles to common-sense simplification have so far proved insurmountable."
Moore thinks he has figured out a way to overcome opposition to the flat tax. Americans, he says, like the simplicity of the flat-tax idea, but "they are not enthusiastic about parting with such sacred-cow deductions as those for mortgage interest, charitable donations, and health benefits." Taxpayers who currently take large deductions would probably wind up paying somewhat more with a flat tax, he concedes, and the special interests that profit from the current tax system would undoubtedly suffer a loss in income.
In a recent Wall Street Journal editorial, Moore expresses confidence that "these objections to the flat tax can be very easily trumped with one small addition." He proposes letting every taxpayer choose "between the current income tax system and an alter-native maximum tax." All that's needed to implement what Moore calls the "Maxtax" is "an amendment tacked on to the end of the 9,000-page Internal Revenue Code." That amendment would provide "the option of bypassing all the preceding requirements, regulations, and instructions and instead paying a tax of 25 percent of gross income earned during the year, minus a tax credit for any payroll tax paid."
In addition to being easy to implement, the Maxtax would have the added benefit of posing no threat to taxpayers -- and special interests -- who prefer the status quo. "Unlike the flat tax," Moore observes, "the alternative maximum tax produces only winners -- no losers. Not a single American family or business would be required to pay even a penny more than they do now, because the Maxtax would be entirely voluntary. The Maxtax should blunt the opposition from special interest groups," he adds, "because it does not end a single deduction, loophole, or credit in the tax code. All deductions in the current system would be retained -- for taxpayers who choose to take them."
Stephen Moore predicts that "millions of taxpaying workers and businesses would enthusiastically opt for the Maxtax alternative -- even many who might face a slightly higher tax liability." He points out that "Americans now spend an estimated 5.5 billion hours a year complying with the income tax code," at a cost of more $150 billion. Five and a half million words in the Internal Revenue Code. Five and a half billion hours wasted complying with it. How much longer will the American people tolerate such stupidity? Not much longer, if Stephen Moore has his way. His "Maxtax" is clearly a step in the right direction.
