ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Tuesday, March 5, 1996 TAG: 9603050016
SECTION: EDITORIAL PAGE: A-5 EDITION: METRO
SOURCE: RICHARD SINCERE
THE NOTION of a flat tax was first introduced by Hoover Institution scholars in the mid-1980s. Only recently, however, has it achieved a sufficient measure of notoriety to be given the widespread attention it deserves.
A number of different flat-tax proposals are on the table. Among the disagreements are the level of the tax - a flat 15 percent, 17 percent, 20 percent, 23 percent? (All these numbers are substantially lower than the 40 to 50 percent of income that most Americans pay in taxes to all levels of government, including the 15 percent that goes to Social Security and Medicare.)
Other disagreements focus on what qualifies as taxable income - wages only, dividend income, interest paid on savings, capital gains, and so forth.
Still other disagreements are about how "flat" the tax will be. Essentially, these disagreements are about whether certain exemptions and deductions should still be allowed, primarily the deduction for home-mortgage interest.
What is lost as the debate about the flat tax focuses on those issues is the flat tax's central advantage: It reduces the size, scope and complexity of the federal tax code.
Currently, federal tax laws run to thousands upon thousands of pages. Stacking each volume of tax laws one on top of the other would create a pile some 20 feet high! The average taxpayer seldom understands everything required of him. Corporations hire lawyers and accountants whose only job is to plow through tax laws. One estimate has been that individuals and corporations spend upwards of $900 billion each year simply to comply with tax laws.
At the same time, corporations hire lobbyists to persuade Congress to pass numerous exemptions in the code that will benefit their industry or even their particular firm. These lobbyists are paid millions each year so that companies will be required to pay less in taxes the following year.
The tax code is full of convoluted language designed to grant narrow income-tax exemptions to particular firms. One finds peculiar passages that define the exemptions as applying to "corporations employing between 19,998 and 20,001 workers in cities located between the Mississippi and Wisconsin Rivers whose business shall consist of no more than 72 percent and no less than 68 percent of out-of-state orders placed by mail or telephone ...."
Lobbyists and corporations also try to make friends with politicians by giving them campaign contributions. Political-action committees can give up to $5,000 per election to candidates, while individuals are limited to $1,000 contributions. Industries with a common interest can form multiple PACs to increase the amount of contributions per candidate or campaign committee from a single interest group.
There is nothing wrong with individuals or groups giving money to candidates whose beliefs they share and whose policies they support. In fact, a good case can be made that the current contribution limits ill-serve our democracy because they limit political speech and make it harder for talented candidates to succeed if they do not have ties to special-interest groups.
The problem is that most of these campaign contributions are designed with one purpose in mind: to gain access to incumbent senators and representatives who can grant favors to the contributors.
This is where a flat tax can greatly reduce corruption in government.
If the tax code is simplified so that exemptions and deductions are reduced to zero, Congress can no longer grant favors to friends and contributors.
If Congress can no longer grant favors, lobbyists and their bosses will no longer seek them.
If lobbyists no longer seek favors, they will have no need to channel money to candidates.
If less money is being channeled to candidates - especially long-term incumbents - it will become easier for talented challengers to win elections on the basis of their policy proposals, rather than the size of their campaign treasuries.
Common Cause and other organizations that decry the influence of money in politics should step forward to support the flat tax. By simplifying the tax code - indeed, by reducing the size and scope of government in any way - we reduce the opportunities for corruption and adverse influence of special interests in the political process. The fewer favors government can grant, the fewer reasons there are for favor-seeker to line the pockets of government officials.
Given this analysis, is it any wonder that both special-interest groups and long-term incumbent politicians oppose the flat tax so vehemently?
Richard Sincere is chairman of the Libertarian Party of Virginia.
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