Taxes: Flat isnt always simple and vice versa
There鈥檚 a theme developing in the tax debate that a flat tax, like Herman Cain鈥檚 9-9-9 or another version that Gov Perry鈥檚 talking about, is simpler than a system of progressively higher, or graduated rates.
Not so. Both can be as simple or complicated as you like. What complicates the tax code is not the rate structure, it鈥檚 the exemptions, loopholes, credits, and so on.
A flat tax has an immediate appeal because it sounds so simple. But as the link above (to a NYT article) points out, most flat schemes exempt certain groups, like the lowest income households, or, if they鈥檙e a sales tax, essentials like food. Even the Cain camp is now saying they鈥檙e going to tweak their plan in the light of . And 鈥渢weak鈥�=more complicated.
Conversely, a progressive system, where tax rates rise with income, can be perfectly simple and even administered automatically, as my former White House colleague Austan Goolsbee has .
Economists often like the flat tax because of its efficiency advantages鈥擨鈥檓 hoping to write up something on that soon鈥攊t鈥檚 not as clear cut as it looks, I think鈥攂ut that supposed advantage has to be weighed against equity/fairness concerns.
My point is that you shouldn鈥檛 be fooled into believing that any tax structure is truly simple until you鈥檙e intimately familiar with the details. Complicating factors can and do and will enter any tax code that is written by people, whether it鈥檚 9-9-9, a 17% flat rate, or any number of graduated rates.
