THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, February 10, 1996 TAG: 9602090026
SECTION: FRONT PAGE: A10 EDITION: FINAL
TYPE: Letter
LENGTH: Short : 42 lines
Sad to say, your recent editorial on the Kemp tax proposal misses the point and incites class envy.
A key aspect of the flat-tax plan is to promote vigorous growth. Maintaining the present system with simplified brackets, as you suggest, will simply continue the anemic growth we see today. Compounded over time, small differences in growth rates have huge consequences.
Your concern that wealth will be massively redistributed from the middle class to the wealthy is preposterous. Any income that either group receives is not distributed to them. Rather, they make money the old-fashioned way: They earn it.
Under our current system, a family with an income of $500,000 pays about $154,000 in taxes while a family with a $45,000 income incurs a tax bite of only $3,800. The first family, with 11 times the income, pays 40 times the tax. A flat-system with a 17 percent rate and a family deduction of $36,000 would result in a tax bill of $78,880 and $1,530 respectively. Both families get significant tax relief.
But what about the capital-gains cut? IRS data for 1993 indicate that 74 percent of people declaring capital gains earned less that $75,000. Clearly a capital-gains-tax reduction would be of immediate benefit to the majority of taxpayers. The big long-term payoff comes in strong economic growth.
Low tax rates result in faster growth, increased employment, increased revenues and a rising standard of living. It is estimated that a flat tax would add $578 billion to the GDP over the next decade - adding about $5,000 to the average family's income.
In summarizing its report, the Kemp panel concluded: ``It lifts incomes. It will rescue interest rates. It will put people to work.''
Let's give it a try.
JAY C. STARLING
Virginia Beach, Jan. 22, 1996 by CNB