The final blow from the very rich

April 24, 1995|By Robert Reno

THE SIREN song of the flat tax has reached the volume of a screech in recent weeks.

Its seductiveness is especially irresistible right at tax time to those who are convinced it is the only alternative to the present system, a system of megalithic and heinous complexity that is universally loathed and deserves to be.

Think of it: A new system shorn of all loopholes, tax forms the size of a post card, a tax rate for all as low as 17 percent, businesses and individuals freed to make rational decisions instead of contorted judgments based on tax advantage, a nation saturated with job-creating new investment from freed-up capital income, fewer inducements and opportunities to cheat, vastly lower rates of evasion, reduced cost of enforcement, pink slips for thousands of Internal Revenue Service agents, no more cushy deductions for those able to hire the best lawyers and accountants, no more breaks for millionaires with summer mansions.

It is true that much of the traumatic complexity of the present tax code has to do with loopholes, deductions and exemptions put there to benefit special interests or to accomplish social and economic goals that could more cheaply and efficiently be achieved through direct government subsidy.

But much of what is maddening in the tax code has to do with an entirely noble goal: fairness.

Fairness is the baby that gets thrown out with the bath water in most of the flat tax plans now knocking around Congress. Robert Eisner, a former president of the American Economic Association, estimates thatthe version of the flat tax offered by Rep. Dick Armey, the House majority leader, would amount to a tax increase for people making up to $100,000 and a tax cut for everybody else with the biggest cuts going to those above $200,000.

It could hardly be otherwise, considering Armey's version would end taxation of income from interest, dividends and capital gains and, in effect, convert the income tax into a tax on labor income only.

There are people whose attraction to the flat tax is the compelling notion of simplification and there are those who see it as tax relief for the wealthy.

In the present Congress, can anybody guess which of these goals would prevail if a flat tax were enacted? These are, after all, the same people who already voted in the House for a tax cut for families making $200,000.

This will hasten the ongoing upward redistribution of income in ,, the United States that was and is still being propelled by the Reagan tax cuts of 1981 which favored the wealthy. If it seems like the rich have been getting richer and the rest of us haven't it's because it's true. Even most conservative economists concede this.

Of course if you say a peep about fairer income distribution these days you get accused of fomenting class warfare. Class warfare is, as we all know, vulgar, economically unsound and practiced only by charlatans, unstable leftists and demagogues.

It is as if, in the name of class peace, the 95 percent of American families who were left behind in the 1980s are supposed to keep quiet and just suffer their fate.

What the rich don't want you to know, I guess, is that the class war is over and they clobbered us.

Robert Reno is a columnist for Newsday.

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