The other day I commented on Herman's Cain's 9-9-9 plan, which turns out on closer analysis to be three VATs for the price of one. Replacing taxes on incomes and profits with a national sales tax, which is what Cain appears to be proposing, would indeed be simple--but not if you collected it in three tranches, each with its own tax-gathering apparatus and associated complexities.
Now, in something of the same spirit, the US is offered the alternative simplicity of the Perry flat tax.
This simple 20% flat tax will allow Americans to file their taxes on a postcard, saving up to $483 billion in compliance costs. By eliminating the dozens of carve-outs that make the current code so incomprehensible, we will renew incentives for entrepreneurial risk-taking and investment that creates jobs, inspires Americans to work hard and forms the foundation of a strong economy.
I note in passing that Perry's flat tax is not flat. (For families earning less than $500,000, he says, exemptions for mortgage interest and state and local taxes would remain. Effective tax rates would therefore vary according to circumstances. Also, the marginal rate would spike in some range of incomes above $500,000 as the exemptions were denied, then fall back at higher levels of income.) I also note in passing that this tax, at the rate indicated, has no chance of raising the 18% of national income that Perry intends to spend, or anything close to that. But for the moment I'm concentrating on the Republicans' difficulty with the concept of simplicity.
The comical thing is that this new tax would be voluntary: taxpayers could choose to be taxed under the existing code if they preferred. This is simpler? To know which code saves you money, you would obviously have to calculate your taxes under both systems. You or your adviser would still have to comprehend the "carve-outs that make the current code so incomprehensible". Maybe if you opted for the Perry tax you would be able to file on a postcard--but before making that choice you'd need to do your taxes the old way first. Thanks for nothing.
In future, I dare say, taxpayers could look forward to even greater complexity, as Congress tinkered with not one but two tax codes. In the fullness of time, to relieve the added burden, a new measure could be introduced: an even simpler Very Flat Tax, also voluntary, allowing taxpayers to choose from three codes, with the option for qualifying households of filing by tweet. Think of the compliance savings.
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