Why There Is No Better Time For The Flat Tax

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Ironically, if there was ever a time for the flat tax, this is it. Consider:
1. The most violent opponent to a flat tax, the mortgage lobby, hooked on the mortgage interest deduction like a long-time junkie on heroin, is at the nadir of its political power, as should be the very concept of stimulating a second housing bubble with government incentives like tax breaks. Now is the time to pull the rug out from under these people.
2. Given the inability of Obama's Economic Superfriends to properly pay their taxes (and considering their genius is supposed to be substantial enough to save the financial world from imminent ruin) there has never been a stronger case for tax simplification. If the Secretary of the Treasury can't (won't) figure out what he owes, how can Joe Sixpack be expected to? Simplification never had a more obvious set of poster children than the current cabinet. If nothing else, it would be amusing to hear them argue against the idea.
3. One of the little appreciated benefits of a flat tax is that a massively complex set of deductions and exceptions inevitably serves those with the wherewithal to retain expensive tax preparation services. Read: the rich. In a time of hyperactive class warfare, and where a chief complaint of the anti-rich is that wealthy Americans have an effective tax burden below 20%, it would seem that a nice, deduction-free flat tax would actually increase average tax rate. Certainly, it would for Corporations, which have even greater means to use clever tax planning to pay fractions of their actual marginal rate.
4. The GAO claims that between $240 billion and $600 billion is spent on tax preparation every year. This is up to 20% of the total amount of tax collected. Think about that. The second most violent opponent to a flat tax, the tax preparation lobby, along with white collar professionals at large, is also near its political nadir. Further, putting $240-$600 billion to more efficient and productive use cannot be other than a good thing. Accountants presently have few friends in the country.
5. IRS auditing and enforcement would be vastly less costly in terms of time, personnel and capital. A portion of these professional and accounting-familiar resources could easily be sent where they are now badly needed: The SEC's enforcement division. The rest could simply be let go, to find more productive endeavors.
We tend to think that the best approach is actually not a totally flat-tax, but a flat tax with a credit for the first, say, $25,000 in income. This is really a two-tier progressive tax, but we won't tell anyone if you won't.
Finally, it seems rather silly to give Congress a lever this big without some checks and balances. We think a three-fifths majority requirement to raise taxes might be a good one. Since there will be no escape from a tax raise, we need to be very careful how easy it is to adopt one.

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