The Flat Tax Strawman

Over at the Mises Institute, Laurence M. Vance has a 2009 article about comparing the flat tax with the FairTax. While generally a decent article, Vance describes "the flat tax" and then goes into not one but two misnamed proposals called "the flat tax" (one by Steve Forbes, another by the Hoover Institute).

Vance is right to complain about these two proposals being unfair compromises: they are rather similar to the "flat tax" Alberta had before godless socialists took over^†. Not particularly flat, though better than not flat at all.

Under a Flat Tax, everyone's income is taxed at the same rate (Forbes says 17 percent; Hall and Rabushka say 19 percent). And not only are there no tax brackets, there are generally no tax deductions other than personal and dependent allowances.

"Generally no deductions except for..." should be all Vance has to say on the topic. A proper flat tax not only has no deductions but no untaxed income level either. You only make $15,000/yr and the flat tax is 19%? Pony up $2850 every year to the government, and enjoy your twelve grand.

Vance is on his game though about FairTax, and includes a nice bit from Murray Rothbard about people who favour consumption rather than income taxation:

The consumption tax, on the other hand, can only be regarded as a payment for permission-to-live. It implies that a man will not be allowed to advance or even sustain his own life, unless he pays, off the top, a fee to the State for permission to do so.

No article about FairTax is complete, of course, without some pot-shots at former talk show host Neal Boortz, one of the major proponents of it.^‡ There's also a delightful proposal from the late Joe Sobran: a highly regressive tax where everybody pays the exact same dollar amount, and so every penny you make above that is gravy (and every penny below that, presumably, means your wages are garnished through the courts).

It would certainly be almost as good as the Flat Tax^TM. Nothing, of course, is as good as a flat tax.

^† Then, a few months later, the NDP won an election

^‡ Neal is, more or less, a decent guy and I enjoyed listening to his show. He's wrong on the FairTax, obviously, but not so wrong on it that he necessarily needs to be the go-to pair of knees metaphorically capped every time somebody wants to complain about FairTax.