The middle class needs a flat tax

July 11, 1999|By Randy Tate

AMERICA is currently enjoying a remarkable economic boom, characterized by low unemployment, low inflation and almost weekly new stock market highs.

More and more estimates are predicting a tremendous federal budget surplus over the next 10 years. But unless we demand and implement profound tax reform now, Washington bureaucrats and special interests will devise countless ways to spend the surplus.

Economic growth and prosperity cannot be measured just in terms of the gross national product, the Dow Jones average and per capita income. I measure it in terms of the quality of life of average, hard-working families. Do both parents have to hold down full-time jobs to make ends meet?

As long as the federal government's tax policies prove more menacing than sensitive to America's families, real reform will still be needed. I believe we should consider a simple, fair system that taxes income only one time and at one low rate -- in short, a flat tax.

Much of the rhetoric against the flat tax dismisses it as a gimmick for the rich, but the reality shows it could be a boon for hard-working families.

The current tax code permits a family of four to shield its first $18,000 of income from taxation. The flat tax would enable that same family to protect almost twice as much, from $33,000 to $36,000, from the greedy hand of government. That is why families making $15,000 to $35,000 a year would benefit most.

Some have objected that the flat tax treats the rich, middle-class and poor alike -- but that is precisely the point. The key to its fairness lies in the fact that in taxing people at the same equal rate, it would require those with means to pay a higher amount.

But a flat tax does more than simply hand a windfall tax cut to families -- it encourages economic growth. By taxing income only once (unlike the current system, which taxes income when we make it and again when we save it and earn interest), a flat tax encourages savings and investment.

Small family businesses will have incentives to invest on the basis of what makes the most financial sense, not what constitutes the best tax write-off. This, in turn, will stimulate productivity and lead to higher wages and better economic health for all Americans.

Cynics and liberals who dismiss demands for lower taxes and economic growth as appeals to greed seem to operate from the presumption that the federal government has the right to confiscate money from America's families, and it is only government benevolence that permits us to keep some of what we earn.

I operate from a different presumption. The money that America's families work hard to earn is theirs by right, and it is only through the consent of the people that governments are authorized to collect taxes fairly, efficiently and responsibly. That's not greed -- that's freedom.

This essay by Randy Tate, executive director of the Christian Coalition, is adapted from his chapter in the Heritage Foundation's book "The IRS v. The People: Time For Real Tax Reform."

Pub Date: 7/11/99

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