They're All Steve Forbes Now

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They're All Steve Forbes Now

In his speech announcing his presidential campaign yesterday, Ted Cruz repeated his advocacy for "a simple flat tax that allows every American to fill out his or her taxes on a postcard." While a flat tax hasn't gotten a lot of attention lately, in recent years it's become something most Republicans agree to without much thought. It's notable that an idea about taxes that by definition involves a large tax cut for the wealthy is so popular in a party constantly struggling against its image as the party of the rich. Yet as more candidates officially join the race, we're almost guaranteed to see a bunch of flat tax plans released. Before that happens, we ought to remind ourselves of what a truly dreadful idea the flat tax is.

When Steve Forbes made a flat tax the centerpiece of his 1996 campaign for president, it was met with a certain degree of puzzlement. Here was a guy who inherited a huge fortune, talking about how the rich shouldn't have to pay so much in taxes. (In a weird coincidence, his plan would have saved him a couple of billion dollars in taxes over the course of his lifetime.) But before long, in Republican circles the flat tax became, if not quite dogma, then certainly the default option for candidates.

Let's look at what the potential 2016 candidates have said on this issue:

* Marco Rubio recently released a tax plan that contains only two rates, 15 percent and 35 percent (in addition to eliminating all taxes on stock dividends and capital gains). But he admitted that what he really wanted was a flat tax: "In an ideal world, it would be a simple one rate for everyone. Hopefully we’ll move in that direction as a nation. We think this is achievable in the short term...If I got to start our country over from scratch, I would either have a flat tax or a consumption tax."

* Jeb Bush has said he's open to a flat tax, but hasn't gotten into details.

* Rand Paul advocates a flat tax, and supposedly would like the rate to be no higher than 17 percent, which would cause a drastic reduction in revenues.

* Rick Perry proposed a 20 percent flat tax when he ran in 2012; I'd guess he'll be saying something similar this time.

* Ben Carson supports a flat tax, though he hasn't provided any details, and like Cruz wants to "eliminate the IRS"; presumably the flat tax will be collected by the Tooth Fairy.

* Mike Huckabee advocates replacing income taxes with a "fair tax" on consumption, which would be flat in that everyone would pay the same rate.

* Bobby Jindal supported Rick Perry's flat tax plan in 2012, but he hasn't issued a proposal for this election (although he did try to eliminate all Louisiana income and corporate taxes and replace the lost revenue with an increase in sales taxes).

* In 2012, Rick Santorum had a plan with just two tax rates; we'll see if he bids down to a flat tax this time.

* When Chris Christie ran for governor in 2009, he criticized his primary opponent's flat tax plan (heresy!). But recently in Iowa, he said he wanted to make the tax system "flatter and fairer." He hasn't provided any details.

* Mike Pence proposed a flat tax in 2010.

As long as you don't think about it for more than a moment or two, a flat tax sounds good. It's simple and easy to understand: Everyone pays the same tax rate on their wage income. Republicans often say they'd like to see the tax system become "flatter" without bothering to go into detail, as though that were self-evidently a good thing.

But a flatter system means one of three things: Either those with high incomes pay less, those with low incomes pay more, or both. And in practice, it's always both.

Here's why. There are currently seven brackets for wage income, ranging from 10 percent up to 39.6 percent. If you set your one flat rate down near 10 percent, the government would bring in only a fraction of the revenue it does now, and wouldn't be able to do nearly anything that we want it to do. You could set your one rate up near 39.6 percent so no rich people got a tax cut, but that would be a spectacular increase in taxes for most people. Or you could set it to bring in a similar amount of revenue as it does now, which would mean your flat rate would be in the middle somewhere. And that means a big tax increase for those who can least afford it, and a big tax cut for the rich.

Given that, you'd think that the flat tax would be something Republicans would like but would be skittish about proposing, since it opens them up to the charge that they just want to help rich people. But in fact, almost every potential GOP presidential contender has at the very least expressed support for tax flattening, and most of them have come out and endorsed a flat tax.

When politicians take a position that carries with it unusual political risk, it's a good sign that they're sincere about it. And all these Republicans genuinely believe it would be good for America if rich people paid less in taxes, while everyone else paid more. Just so we have that clear. 

They're All Steve Forbes Now

In his speech announcing his presidential campaign yesterday, Ted Cruz repeated his advocacy for "a simple flat tax that allows every American to fill out his or her taxes on a postcard." While a flat tax hasn't gotten a lot of attention lately, in recent years it's become something most Republicans agree to without much thought. It's notable that an idea about taxes that by definition involves a large tax cut for the wealthy is so popular in a party constantly struggling against its image as the party of the rich. Yet as more candidates officially join the race, we're almost guaranteed to see a bunch of flat tax plans released. Before that happens, we ought to remind ourselves of what a truly dreadful idea the flat tax is.

When Steve Forbes made a flat tax the centerpiece of his 1996 campaign for president, it was met with a certain degree of puzzlement. Here was a guy who inherited a huge fortune, talking about how the rich shouldn't have to pay so much in taxes. (In a weird coincidence, his plan would have saved him a couple of billion dollars in taxes over the course of his lifetime.) But before long, in Republican circles the flat tax became, if not quite dogma, then certainly the default option for candidates.

Let's look at what the potential 2016 candidates have said on this issue:

* Marco Rubio recently released a tax plan that contains only two rates, 15 percent and 35 percent (in addition to eliminating all taxes on stock dividends and capital gains). But he admitted that what he really wanted was a flat tax: "In an ideal world, it would be a simple one rate for everyone. Hopefully we’ll move in that direction as a nation. We think this is achievable in the short term...If I got to start our country over from scratch, I would either have a flat tax or a consumption tax."

* Jeb Bush has said he's open to a flat tax, but hasn't gotten into details.

* Rand Paul advocates a flat tax, and supposedly would like the rate to be no higher than 17 percent, which would cause a drastic reduction in revenues.

* Rick Perry proposed a 20 percent flat tax when he ran in 2012; I'd guess he'll be saying something similar this time.

* Ben Carson supports a flat tax, though he hasn't provided any details, and like Cruz wants to "eliminate the IRS"; presumably the flat tax will be collected by the Tooth Fairy.

* Mike Huckabee advocates replacing income taxes with a "fair tax" on consumption, which would be flat in that everyone would pay the same rate.

* Bobby Jindal supported Rick Perry's flat tax plan in 2012, but he hasn't issued a proposal for this election (although he did try to eliminate all Louisiana income and corporate taxes and replace the lost revenue with an increase in sales taxes).

* In 2012, Rick Santorum had a plan with just two tax rates; we'll see if he bids down to a flat tax this time.

* When Chris Christie ran for governor in 2009, he criticized his primary opponent's flat tax plan (heresy!). But recently in Iowa, he said he wanted to make the tax system "flatter and fairer." He hasn't provided any details.

* Mike Pence proposed a flat tax in 2010.

As long as you don't think about it for more than a moment or two, a flat tax sounds good. It's simple and easy to understand: Everyone pays the same tax rate on their wage income. Republicans often say they'd like to see the tax system become "flatter" without bothering to go into detail, as though that were self-evidently a good thing.

But a flatter system means one of three things: Either those with high incomes pay less, those with low incomes pay more, or both. And in practice, it's always both.

Here's why. There are currently seven brackets for wage income, ranging from 10 percent up to 39.6 percent. If you set your one flat rate down near 10 percent, the government would bring in only a fraction of the revenue it does now, and wouldn't be able to do nearly anything that we want it to do. You could set your one rate up near 39.6 percent so no rich people got a tax cut, but that would be a spectacular increase in taxes for most people. Or you could set it to bring in a similar amount of revenue as it does now, which would mean your flat rate would be in the middle somewhere. And that means a big tax increase for those who can least afford it, and a big tax cut for the rich.

Given that, you'd think that the flat tax would be something Republicans would like but would be skittish about proposing, since it opens them up to the charge that they just want to help rich people. But in fact, almost every potential GOP presidential contender has at the very least expressed support for tax flattening, and most of them have come out and endorsed a flat tax.

When politicians take a position that carries with it unusual political risk, it's a good sign that they're sincere about it. And all these Republicans genuinely believe it would be good for America if rich people paid less in taxes, while everyone else paid more. Just so we have that clear.