America needs a flat tax

The current tax system in the United States is too complicated and allows the politically well-connected to take advantage of special breaks, which are out of reach to average people and businesses. Sustained economic growth needs to be backed with lower tax rates, which would continue rewarding hard-working Americans by leaving more money in their pockets.

The government should make the taxpayer’s life more simple, not more difficult.

Several countries from the former Soviet bloc have adopted the flat tax successfully, thus encouraging respectable economic growth. More governments in Central and Eastern Europe are now considering following this example. They would be right to do so.

Under the flat tax system, every taxpayer gives back to the authorities a fixed percentage of his income, usually under twenty percent, regardless of how much money he or she makes. It is the opposite of the progressive system, where the more successful have their income redistributed among society in the name of “fairness.”

A flat tax uses only two postcard-sized forms: one for labor income and the other for business and capital income. The present system requires 893 forms.

By leaving more money in the pockets of those who are the principal earners, the flat tax would eliminate bias against saving and investment, thus resulting in higher returns for the government. Wealthier people contribute more to the public coffer, even if their tax rates are lower. To illustrate, 15 percent out of $70,000 is more than 25 percent out of $40,000.

A low flat tax rate reduces the penalties against productive behavior. Hard work, entrepreneurship, risk taking and ingenuity are not penalized by depriving an individual from the income that he has earned with great difficulty.

Even today’s liberal economists agree there is a relationship between tax rates and the incentive to increase personal income. Controversy arises when attempts to measure this effect are undertaken.

Therefore, I challenge you, dear reader, to look closely at yourself. Would you feel more compelled to work for a greater or lesser amount of disposable income? My guess is that this is a rhetorical question.

A simpler system also eliminates a great number of provisions and exemptions.

Everyone is aware of the great number of legal loopholes available to those who know where to find them. Filling out complicated forms takes time and leaves more room for mistakes. The government should make the taxpayer’s life more simple, not more difficult. After all, authorities ought to be for the people, not the other way around, which is what America’s founding fathers had in mind when declaring independence from the British Crown.

Lower taxes are also more conducive to lawfulness. A businessman is less likely to cheat if he is not struggling to make ends meet.

Moreover, all flat tax proposals are, in a way, family-friendly. Households would receive a generous exemption based on family size. For instance, a family of four would not begin to pay tax until annual income reached more than $30,000.

America is in dire need of economic growth and global competitiveness. One of the things Washington can do for entrepreneurs is to lower their operating costs by lowering taxes and simplifying the system. This would result in more competitive prices of United States commodities traded around the world. Moreover, such a policy strategy would greatly contribute to the long-term well-being of Americans. According to the Harvard University economist Dale Jorgenson, tax reform would boost national wealth by nearly $5 trillion.

The United States is proud to consider itself the land of opportunity. The success of America is founded on free-market capitalism and hardworking individuals, who make this country prosperous.

It would be encouraging to continue seeing the United States as a global leader in this area. For now, the task has been embraced by the emerging-from-socialism economic lilliputians of Eastern Europe.

Wisniewski is a senior economics and Spanish major and a columnist for The Spectator.