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Friday, September 30, 2011

WSJ: Obama, Buffett Tee Up the Flat Tax for GOP Tax Reform

Wall Street Journal op-ed, Flat Is the New Fair: Is President Obama Paving the Way for GOP Tax Reform?, by Stephen Moore:

'Suddenly, liberal Democrats are making the same argument about the tax code that I've been making for 20 years," laughs former Republican House Majority Leader Dick Armey. "Welcome to the party." Mr. Armey, who along with Steve Forbes has been the torch bearer for the flat tax since the early 1990s, believes that the latest applause line from President Obama that "billionaires should pay the same tax rate as janitors" may be the political gateway to sweeping tax reform.

Mr. Forbes sees an opening here too and says: "The flat tax is the perfect issue for these times. It fixes the economy and doesn't cost a dime." He's right. It's the teed-up GOP response to a jobless recovery and the near-universal sentiment among voters that the tax code is corrupt beyond repair. ...

Done correctly, the flat tax eliminates all double taxation of saving and investment. But if liberals won't accept a lower tax rate for capital gains and dividends, perhaps the grand deal in Washington could be to tax everything at 16% or 17%.

Democrats have come to a different conclusion: They want to get rid of the deductions and raise tax rates at the same time. When has that ever worked? The near 100-year history of the tax code teaches this inviolable law of politics: The higher the tax rate, the more tax carve-outs there will be for yacht owners. That is why the rich paid a smaller share of the income tax in the early 1960s when the top tax rate was 91%, and in the 1970s with a 70% rate, than they do today with a 35% rate. ...

Why aren't Republicans in Congress and in the presidential race making this case? Newt Gingrich and Jon Huntsman have tax rate reform proposals that move toward a flatter tax. But the candidate who comes closest to a true flat tax is Herman Cain. ... Mr. Cain has super-sized solutions to an economy with super-sized problems.

http://taxprof.typepad.com/taxprof_blog/2011/09/wsj-obama.html

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Comments

"flat" now means "zero" (at least with respect to the corporate income tax) Corporate Income Tax means that non-taxable entities and foreigners have to bear some tax burden.

Posted by: jim harper | Sep 30, 2011 11:55:54 AM