Thoughts on the Flat Tax

Adopting a flat tax in place of our current complicated tax system is attractive to many people. Why? Because to the average person, the thought of a simple tax percentage that would be applied to all earned income sounds like an equitable and less complicated way to be taxed.

The benefit of a flat tax is that bookkeeping would be reduced or eliminated for most people. Paying high fees for professional tax help would be a thing of the past. How much money did you make last year? Just multiply that number by the flat tax rate and that's your income tax for the year.

There is a downside to a flat tax, however. Once our current, convoluted tax system is tossed out and a flat tax is adopted, everything will seem idyllic for a time. But soon, the same grumbling we used to hear from our politicians will be heard again. The percentage of flat tax is not pulling in enough money to fund everything the government wants to do. So, what do you think their answer will be?

Government prefers to look at taxpayers for more money rather than looking at itself for ways to live within its budget. Since raising the flat tax percentage would be viewed as punitive on lower-income families, the most likely scenario would be a surtax that would be imposed on to moderate- and higher-income taxpayers. This would be on top of the flat tax, not instead of it. The problem with the surtax, like the flat tax, is that it will be a fixed amount. Unalterable. Our current, convoluted tax system is out on the scrap heap, along with all of our tax credits and deductions.

With all our deductions and credits eliminated under the flat tax system, any flat tax or surtax imposed on our income can't be minimized. Currently, we can take deductions for charitable contributions, childcare expenses, real estate taxes, mortgage interest, educational expenses, deductible IRA contributions and many others to lower our taxable income, and thereby, our tax. A flat tax system would do away with these deductions. Permanently.

Believing that a flat tax would be a better way to tax our income is a fantasy. Even though it's complicated and a headache, our current tax system gives the taxpayer more opportunity to reduce tax liability. A flat tax system would give no such opportunity. Once our deductions are eliminated, they are gone for good. Let's not let that happen.