THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Thursday, October 13, 1994 TAG: 9410130017
SECTION: FRONT PAGE: A14 EDITION: FINAL
TYPE: Editorial
LENGTH: Medium: 58 lines
Imagine filing your taxes on the back of a postcard-size form in 15 minutes. Imagine paying no tax on capital gains, no tax on interest or dividends and no tax on inheritance.
No fiddling with adjustments, allowances or deductions. One bracket, little paperwork, few headaches.
After a burst of interest in the mid-1980s, enthusiasm for the flat tax - a single rate paid by all taxpayers with minimal deductions and exemptions - has suddenly revived. A flat-tax proposal by Texas Republican Rep. Dick Armey is gaining surprising support, both in Congress and on the campaign trail.
Workers would calculate how much they earn and would pay 17 percent to Uncle Sam. Corporations would total gross receipts, subtract the cost of goods and services they buy, and also pay 17 percent. The tax code, often used to bestow favors on the politically well-connected, would be tamed.
And although the elimination of the tax on capital gains and dividends would unleash incentives to save and invest, bringing the United States into line with many industrial nations, the plan is not a giant tax cut. Many deductions would also be abolished.
Armey estimates the flat tax would cost $20 billion to $40 billion in lost revenue. His detractors say it would cost much more. But they fail to account for the dynamics of growth the tax change could facilitate. The difficulty of tax evasion under a flat tax (the IRS estimates the government lost $150 billion to evasion last year) is also not factored into many ``cost'' estimates.
Critics also say the tax change would be a boon for the rich. But it is precisely the rich who have the resources to take advantage of today's complicated tax laws. It is the working poor who benefit most from the Armey plan, as it exempts many of them from paying taxes at all. The plan calls for personal exemptions of $13,100 for singles, $17,200 for single head of household, $26,200 for married couples filing jointly and a $5,300 allowance for each dependent.
Some Republicans are smart enough to see the issue's potential popularity with the public. Senate candidates Michael Huffington of California and Garabed Hayatian of New Jersey have both endorsed the Armey proposal. And in Virginia, Senate candidate Oliver North has spoken favorably of the flat tax, as have Republican House candidates George Sweet in the 4th district and George Landrith in the 5th.
And it's not just Republicans and conservatives who like the idea. Jerry Brown briefly revived his flagging 1992 campaign for the Democratic presidential nomination by talking up the flat tax. Sen. Bill Bradley, D-N.J., has supported it in the past.
The flat tax is a long way from reality. But if the reaction against tax increases by both Presidents Bush and Clinton continues, the flat tax might yet enjoy a second life. by CNB