Posted by Morbo
The idea behind the progressive income tax is pretty simple: You make more money, you pay a higher tax rate. If you’re a finance titan, professional athlete or even a trust-fund baby who pulls in hundreds of millions a year, a 30 percent tax rate isn’t going to kill you. You can pay that and still have plenty left over for yachts, cars, mistresses, etc.
Conversely, if you’re struggling to make ends meet as a member of the working class, you should pay at a mucher lower rate — maybe 10 percent or less. (Maybe even nothing in some cases.)
This sensible system horrifies some conservatives, who keep advocating ways to shift the tax burden downward. Perhaps the most famous proponent of this view in recent times was Steve Forbes, whose flat tax would have imposed the same tax rate on a multi-millionaire captain of industry as fast-food clerk. This was actually taken seriously by some people who have been to school. Flat tax? More like flat head.
As President George W. Bush shakes up his economic team, the flat tax may reappear — under a different name. The Washington Post reports today that Bush’s new economic team will consider many options for reforming the tax code. Bush will name a commission that will make recommendations. The paper reports that the commission could recommend that the federal government “replace the income tax with a sales tax or value-added tax.”
Anyone who pays taxes knows that the current code is too complex. I’m still peeved that people are getting mohair subsidies. So OK, reform the whole thing. But reform need not be a St. Valentine’s Day Massacre. Tossing the entire system in favor of a VAT or a national sales tax is definitely not the way to go for the simple reason that such forms of taxation are flat and therefore regressive.
Morbo could support a limited VAT on luxury goods — yachts, furs, private aircraft, etc. No poor person in the inner city buys a yacht. But poor people in the inner city do buy groceries, medicine and clothes. Subjecting them to high taxes on items necessary for daily survival is unjust and cruel.
In a way, it’s kind of interesting to see this idea even being talked about. I have a feeling it would not sit well with most Americans. Most people don’t notice when the GOP tinkers with the tax code and adds a loophole that allows millionaires to walk away with yet another tax cut. They will notice when a giagantic national sales tax is added to their total down at the Wal-Mart.
Morbo has a theory that some ideas are so stupid and bad that the people need a taste of them just to see how lousy things could get. Then, of course, they will recoil and react politically. The VAT/national sales tax is one of these ideas. In a case like this, it would be nice to see the Democratic leadership in Congress call the GOP’s bluff. They could simply smile and say to Bush and the Republicans, “You control the government. We won’t interfere. Go ahead. Make our day.”