"Doug Miller" wrote in message
t...

[snip]

You're missing the point, which is that the deductions which would be
eliminated under a flat tax scheme are things that have no relationship
whatsoever to producing income: mortgage interest, medical expenses,
charitable contributions, state and local taxes, and so forth.


This is a favorite argument of the flat-taxers, but I think it has misstated
some important complications:

Personal Income tax rates were graduated because of a basic assumption that
people with lower income needed to use more of their income for normal
living expenses, and therefore needed a lower tax rate to keep from cutting
into their "living expenses." Gradually those living expenses became better
defined, so that differences in living expenses resulted in differences in
taxable income. Some of the expenses which Congress felt should be included
in normal living became mortgage interest, city and state taxes, medical
expenses, charitable giving, etc. -- each of which varied from person to
person.

A flat tax would not differentiate between someone making $50,000 with a
paid up mortgage and no medical expenses, and someone with high mortgage
expenses and $20-30K of medical expenses. In the view of many the person
with high medical expenses should pay a lower income tax, as a matter of
government compassion and policy.

I've lived in places with a flat personal tax rate, and for those areas it
has always worked well. OTOH, in the U.S., too many of us have made
long-term decisions on our life that included the tax impact of those
decisions, such as which house to buy and how much of a mortgage to sign up
for. To change the tax rules now in mid-stream would have an unfair impact
on many, just as changing the overall business tax structure would be unfair
to those who have already made long-term business commitments.

A flat tax is not necessarily a fair tax, and major upheavals in tax policy
will not inspire confidence in those being taxed. This will instead drive
major businesses to move to locations where the business climate is more
favorable and predictable.