The Fair Not Flat Tax
THE PATH TO SENSIBLE TAX REFORM IS NOW CLEAR. WE should replace the inconsistent income and ineffective estate taxes with a single, consistent, progressive spending tax: the Fair Not Flat Tax.This isn't nearly as hard to do as it sounds. The current income tax is already largely a consumption tax. We will start with it, bearing in mind that Consumption = Income — Savings. Four simple steps can take us to the promised land of a better, simpler tax:
In tax reform, then, history teaches us that boldness pays.
Taxpayers may well suffer less under radical reform than un-
der a blizzard of piecemeal changes.
—Carl S. Shoup, introduction to Blueprints for Basic Tax Reform
|1.||Include borrowing as income|
|2.||Allow unlimited deductions for contributions to savings accounts; tax withdrawals from such accounts|
|3.||Repeal the special capital gains rate|
|4.||Repeal the gift and estate tax|
That's it. Take these four steps, and we have a consistent, progressive spending tax. We can get rid of lots of other rules along the way— all of the stuff about basis, realization, and so on that the inconsistent income tax has spawned. In the meantime, we can keep or even increase progressivity in tax rates. We'll have a better, simpler, fairer system overnight.