Monday, March 07, 2005

Flat Tax Fever

Big Media Matt says something which should be obvious but for some reason isn't:

On one of those awful cable news financial shows last weekend I saw a supply-sider making the argument that conservatives shouldn't support the idea of a VAT because it's too easy for politicians to raise VAT rates even if they start out low. That may well be correct, though I won't go into now. She then went on to argue that we ought to have a flat tax because it would make the tax code simple. Once upon a time, I was against the flat tax but accepted the CW that there's a tradeoff between simplicity and progressivity. Now that I've actually paid taxes, I'm baffled that any adult could possibly advance this argument.

What makes doing your taxes complicated is, very clearly, the part of the process where you need to calculate your taxable income. This is complicated, primarily, because we tax different kinds of income (dividends, interest, capital gains, wages, etc.) differently, and because the rules for things like business expenses and so forth are complicated. Once you have that figure calculating what you actually owe -- the part where having different brackets factors in -- is very simple. Of course it would be somewhat complicated to do this if you had to do it by hand, but a little computer assistance (TurboTax, say) makes it very simple. Computers can do division -- even complicated division -- very easily and automatically. What they can't do is calculate all your deductions and expenses for you. Those of us in the journalism trade tend to have a lot of miscellaneous income and a lot of small-bore business expenses that add up. It's complicated. There are things we can and should do to simplify the situation. But progressivity has nothing to do with it.

Right. The complicated part of doing your taxes has nothing to do with the tax rates. There could be 5000 brackets and a formula which required advanced calculus to compute and it wouldn't matter. The whole thing can always be mapped into a tax table.

And, on a related note could someone please tell the Wall Street Journal editorial page editor to stop publishing people who claim that in Hong Kong "almost everyone" there pays a flat tax. Unless by "almost everyone" we mean "approximately 1.5% of workers" it just isn't true.