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Saturday, January 29, 2011

Clint Eastwood on the Flat Tax

Esstwood 2 Wall Street Journal Weekend Interview, A Hollywood Icon Lays Down the Law:

As he takes on the story of J. Edgar Hoover, the filmmaker talks about movie lawmen, his Korean War days and the flat tax. ...

"But I'll tell you when I liked [California Governor Jerry Brown]—and I wasn't a registered Democrat—but I liked him when he was running for president [in 1992] on the flat tax. . . . A ton of economists, both liberal and conservative, have argued for a flat tax, but nobody's ever had the nerve to do it. . . . It would simplify things, but simplification doesn't seem to be in the human psyche."

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Comments

Finally, a statement from someone whose education, background, experience and knowledge makes him qualified to talk about tax policy.

Being the former one term mayor of Carmel-by-the-Sea, Ca is all the credentials I need for someone to be able to give expert tax policy advice. Now that Sonny Bono is dead, surely Mr. Eastwood moves to the top tier of economic analysts and policy gurus among former mayors of wealthy California towns. And for those cynics out there, I am sure that the fact that a flat tax could save Mr. Eastwood millions in taxes has nothing to do with his policy position.

Posted by: Sid | Jan 29, 2011 4:57:27 PM

A flat tax wouldn't actually simplify anything. But being as this is a .44 elasticity of income, the most powerful incentive in the world, and would blow the top of your economy clean off, you've got to ask yourself one question: Do I feel lucky? Well, do ya, punk?

Posted by: AMTbuff | Jan 29, 2011 7:09:43 PM

Anyone who thinks that a new mathematical formula for the tax will cure all of the problems of taxation is deluded out of their minds.

Posted by: anon | Jan 29, 2011 9:11:35 PM

Well, being poor, let me say that while I am not taxed when it comes to income, I do have to pay tax on everything I buy.

And considering that basically I don't buy any luxuries (my computer is 8 years old, haven't been to a movie in 20 years, ditto for a restuarant) and my savings are about exhausted, any further loss of income (like a tax) would either leave me starving or on welfare.

And of course, if you start making exceptions for poor people, you're right back where you started from.

But hey, maybe the solution is to throw poor people in debtor's prison!

Posted by: JeremyR | Jan 30, 2011 7:57:08 AM

I guess insulting Clint Eastwood and his lack of an intellectual pedigree is easier than actually making a point about why he is wrong.

Obviously the flat tax he envisions would be simpler than our current tax structure. I tend to agree with "anon" though that our government would find a way to much it up. But you could infer that Mr. Eastwood is similarly jaded by his comment that "but nobody's ever had the nerve to do it. . . . It would simplify things, but simplification doesn't seem to be in the human psyche."

Posted by: Ross | Jan 30, 2011 8:10:03 AM

It seems the posters here are falling all over themselves to prove Mr. Eastwood's point. Do we know they aren't among the groups profiting handsomely from their cherished tax code's complexity??

Posted by: Bob Young | Jan 30, 2011 8:12:21 AM

A flat tax takes advantage of a more or less universal agreement.

If you ask people what the most the government takes of people's income ought to be, pretty much all incomes agree around 25%.

People would agree, if that had to pay the same rate, then on what the government ought to be spending, by voting that rate.

A variable rate makes vote buying possible by inserting disagreement across classes, and catering to the larger class.

So a flat tax is a great idea. It gives everybody the same stake in what they vote for. It's a uniter.

Unfortunately it would quickly change back to vote buying with adjustments, and there you are back with the same old dynamics of taxing the rich more and the poor less, percentagewise.

Posted by: rhhardin | Jan 30, 2011 8:17:42 AM

It is fairly obvious that the three who commented previously have never actually explored the potential of a flat tax. It IS the simplest thing possible. No tens of thousands of rules bundled together. You pay a flat fee....no hedges, no deductions, no added-on garbage. Just a simple one-tier tax. The reason it does not catch on? Pols hate not being able to influence tax law to curry favor, and the public never gets a full, honest look at how it works.

Posted by: DukeofDeLand | Jan 30, 2011 8:29:39 AM

I just read my comment above, and it made me realize what an idiot I am. So I apologize for being a blithering idiot.

Posted by: Sid | Jan 30, 2011 9:17:43 AM

Thanks, Sid. The apology was nice. Didn't think we had to be a Tax Attorney to have a valid opinion about the tax structure. Might suggest a look at the "Fair Tax" proposal instead of the Flat Tax approach.

Posted by: Jim | Jan 30, 2011 11:24:36 AM

When Eastwood says "but simplification doesn't seem to be in the human psyche", he is wrong. The objection to simplifying the tax system is that it would wrest control, and thereby the ability to grant favors, from the politicians. The only way to get the politicians to agree to a flat tax is to convince them their disagreement will make them ex politicians.

Posted by: Rick Caird | Jan 30, 2011 11:50:41 AM

The least complicated thing about our tax system is the progressive rate structure. The income tax is hideously complex and must be reformed, but that does not necessarily entail flattening.

I think the best thing about the income tax is that it is still pretty progressive. My dad worked 11 hours a day 6 days a week and never earned a fraction of what I do because he didn't share the great advantages I had (one of which was having him as a father). I happily pay a much higher effective tax rate than people like my father. I don't understand why people even richer than I are so resentful of their relatively modest tax burdens under our progressive income tax.

Posted by: Len | Jan 30, 2011 2:14:23 PM

The earlier commenters are probably part of the tax-preparer-industrial complex. Don't forget about all of the accountants and tax attorneys whose bread is buttered by having the tax code be so complicated that no one can do their own. If the tax gets simpler and flatter, taxpayers have less incentive to hire someone to help them find and exploit loopholes in the tax code. And who loses out then? Why it is tax accountants and tax attorneys.

Posted by: Flatlander | Jan 30, 2011 2:39:15 PM

Sid - outstanding, it's been a long time since I've seen words retracted. I do like the statement and by the way, yes, this punk feels lucky and "I gots to know."

The current structure made it so that the choice was either to get a mortgage, wife, three kids and support my elderly mother in law, or pay huge and support someone else.

They're waking up now and this situation is better than the alternative. However, in no way is this to be construed as some sort of endorsement that my representatives have any real authority to dictate the direction of my life and my investment decisions. It isn't their business.

Good luck to us all.

Posted by: Guaman | Jan 30, 2011 2:44:11 PM

Read the Torah. If a 10% flat tax is good enough for the Master of the Universe, it should be good enough for Uncle Sam. Looks like it's good enough for Dirty Harry, too.

Posted by: the permanent newbie | Jan 30, 2011 2:45:06 PM

A flat tax is only a uniter to the extent that the public doesn't understand graduated income tax brackets. That millionaire is paying the exact same rate on his first $50,000 as a middle class clerical worker.

Posted by: tmoore | Jan 30, 2011 2:48:32 PM

Well, it appears there are two Sid’s responding on this Blog. One is a self-admitted idiot and the other is me, the person who writes brilliant and perceptive, sometimes funny comments.

Let me ask all those supporters of a flat tax and its supposed simplification a couple of questions.

1. Alimony is currently a deduction for the payor and income for the recipient. Would the payor still get a deduction and does this mean a set of rules distinguishing alimony from child support?

2. In the current code, proceeds from life insurance are excluded from income, does this remain excluded in the Flat Tax?

3. Cancellation of Debt Income is excluded if the person is insolvent. Is this income included in taxable income under the flat tax?

4. Proceeds from legal damages for physical injury are currently excluded from income, will they be taxed under the simplified Flat Tax? If not, how does the Flat Tax define physical injury?

5. Won’t raising the tax on dividends and capital gains by about 40% in the Flat Tax produce a huge disincentive for investment and growth as Conservatives argue?

6. What is the expected impact on non-profit groups with the elimination of charitable deductions?

7. Are scholarships to be taxed as income, or are they excluded and if so, how is scholarship income that requires say, graduate students to teach handled?

Whenever I have posed these and many similar questions to supporters of the Flat Tax, the answer I always get is “all that will have to be worked out”. which I guess is we don’t have a Flat Tax.

Allowing for a provision for any of the items I mentioned, plus many others results in a complicated tax system, just like we have now. On the other hand, taxing things like damages from injuries, or scholarship income or not allowing a deduction for alimony may strike more than a few people as unfair

Anyone here have any good answers? I didn’t think so.

Oh, and did everyone notice that Dilbert’s comments on taxes were far superior to Mr. Eastwood’s?

Posted by: Sid (real one) | Jan 30, 2011 7:14:58 PM

More Eastwood quotes on taxation:

"A man's got to know his percentage limitations."

"Go ahead, make my daily per diem."

"I tried taking reasonable deductions, I didn't like it."

"In this world there's two kinds of people, my friend. Those with loaded wallets, and those who dig. You dig."

Posted by: Michael Whitty | Jan 31, 2011 8:13:17 AM

I agree with the "Flat tax" take 10% of your "net worth" and tax it and send it to the government. This is the real "fair" tax unlike the tax Forbes and others describe which hurt working people, this will send a message to the evil empire that the "flat tax" will hit them in the pocketbook. Net worth tax-a "fair tax".

Posted by: Nick Paleveda MBA J.D. LL.M | Jan 31, 2011 12:12:32 PM