Fair Not Flat: How to Make the Tax System Better and Simpler

By Edward J. McCaffery | Go to book overview

ONE
Tax Basics

Every time people try to punish the rich, the rich don't simply
comply, they react. They have the money, power, and intent
to change things. They do not just sit there and voluntarily pay
more taxes. They search for ways to minimize their tax burden.
They hire smart attorneys and accountants, and persuade
politicians to change laws or create legal loopholes. They have
the resources to effect change. … The poor and middle class
do not have the same resources. They sit there and let the
government's needles enter their arm and allow the blood do-
nation to begin.

—Kiyosaki, Rich Dad, Poor Dad

TO BUILD A NEW TAX SYSTEM, WE SHOULD FIRST UNDERstand the current one. This sounds intimidating, but it need not be. A few basic ideas help to make the big picture of tax clear.

Tax has building blocks, just like any complex subject. There are four particularly important ones in tax: the taxable unit, the tax base, the rate structure, and the timing of tax. Who pays tax? On what? How much? When? These practical questions lie at the core of all tax systems.

Bases and rates are the typical concerns of tax policymakers. After all, it makes sense to start by thinking about what we are taxing, and to what extent. But I have learned from years of thinking about tax that timing may be the most essential building block of all. Making a fair choice about the tax base and rate structure involves under

-9-

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Fair Not Flat: How to Make the Tax System Better and Simpler
Table of contents

Table of contents

  • Title Page iii
  • Contents vii
  • Tables and Figures ix
  • Acknowledgments xi
  • Introduction - Time for a Change 1
  • One - Tax Basics 9
  • Two - The Trouble with the Income Tax 27
  • Three - The Case for a Spending Tax 45
  • Four - Death to Death Taxes 62
  • Five - Progressivity Can Live 78
  • Six - The Fair Not Flat Tax 97
  • Conclusion - Toward Glass Teamwork, Not Glass Conflict 112
  • Questions and Comments on the Fair Not Flat Tax 117
  • Glossary of Key Terms 161
  • Further Reading 167
  • Index 171
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