Re: Forbes Camp.

The Baileys (
Wed, 17 Mar 1999 07:02:11 -0500

Michael Lorrey wrote:

>I fail to see how it could be a fiscal catastrophe. Its generally
>that the 17% rate he proposes is revenue neutral,

I'm not sure who is "generally" recognizing that Forbes' 17% tax rate is revenue neutral, but the U.S. Department of Treasury is not one of them. The Treasury estimates Forbes' plan will revenue shortfalls of $200 billion+. The Archer, Gramm, and Kemp flat tax proposals are as bad or worse. Even Robert Hall and Alvin Rabushka, who first proposed the concept of a flat tax in 1983, have stated that a flat tax is not tenable.

>and considering that the
>average millionaire actually pays taxes in the 14% range indicates that the
>will actually pay more.

First, you pay federal income taxes on your current income, not your net worth. Thus, net worth is not a good indicator of effective tax rate. Secondly, the top marginal tax rate in the U.S. is 39.6%. Since this rate applies to income over $200,000 its obviously wrong to think that the "average" top-tier income earner's effective tax rate is 14%. Also, Forbes plan eliminates taxation of capital gains and interest. 70% of all capital gains and interest income is realized by the top 5% of American society. Here we have a tax rate change from 28%/20% to 0%. It is quite clear that under Forbes flat tax proposal (and the others as well) that the upper and upper middle class will receive all of the tax benefit. Furthermore, according to the Treasury, 69% of the tax benefit generated by Forbes plan inures to the top 3%.

The flat tax promotes the myth that a simpler tax code must incorporate a single tax rate regime. This is absolutely wrong. Forbes, Archer and other GOP disciples are attempting to capitalize on the average American's ignorance of the complexities of the tax system. The complexity in the current tax system is not the progressive tax rate (there are 4 or 5 tax rates which are very easy to follow). The complexity in the current tax system is determining what is "taxable income". We can keep the progressive tax concept (i.e., higher income earners pay a larger portion of their earnings than lower earners) while simplifying the tax code. But why would Forbes and others want to do that when they can captalize on the public's distaste for the current tax system by deceiving them into supporting a huge tax cut for Forbes and the rest of his wealthy buddies.

Doug Bailey