Originally published July 25 2005
Economic expert explains flat tax benefits for businesses, individuals
by Mike Adams, the Health Ranger, NaturalNews Editor
Economic researcher Daniel J. Mitchell, Ph.D., notes that many people are calling for a flat tax as a form of tax reform, but thinks that few people fully understand it, so he breaks it down in an article for The Heritage Foundation.
There is widespread consensus that the current tax system is a complicated failure that hinders the nation's growth while allowing the politically well-connected to manipulate the system to get special breaks that are not available to average workers and businesses.
This is stimulating a great deal of interest in shifting to a sim�ple and fair flat tax.
For instance, President George W. Bush has appointed the President's Advisory Panel on Tax Reform to recommend options for fundamental tax reform,[1] the Department of the Treasury has produced extensive analysis of the flat tax and other reform options,[2] and lawmakers on Capitol Hill are exploring various ways to reform the tax code.
Flat tax proposals would eliminate provisions of the tax code that bestow preferential tax treatment on certain behaviors and activities.
Getting rid of deductions, credits, exemptions, and other loopholes also helps solve the problem of complexity, allowing taxpayers to file their tax returns on a postcard-sized form.
Flat tax proposals would eliminate the tax code's bias against capital formation by ending the double taxation of income that is saved and invested.
A: It depends on the tax rate, what happens to spending, and how much faster the economy grows under a flat tax.
The size of the family allowance also plays a key role since the decision to protect a certain amount of income generally means that the rate on income above that level has to be higher.
This does not mean that itemized deductions have no importance; it simply indicates that the benefits generated by a robust economy more than offset any costs associ�ated with lost deductions.
It is fur�ther evidence of the need for a constitutional amendment that requires a supermajority to raise taxes.
A: As noted, the sales tax and flat tax are different sides of the same coin.
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