There has been quite a buzz about the possibility of Giuliani and Forbes becoming flat tax soul-mates. While the flat tax would be a welcome improvement from our current system and its 65,000 pages of code and over 600 active tax forms, I am still not convinced that a flat income tax is the type of reform that will have a lasting impact.
Sure, the flat tax plan purports to reduce filing to a "postcard." But, it is still an income tax. And I guarantee that over time, it will become a target for well-intentioned and self-serving adjustments that will soon recreate the income tax system we have now. In fact, before a flat tax would make it out of committee, it would begin to include exemptions and deductions just like the current system.
Fundamental reform requires fundamental change. Simply offering a blank canvass to the same artist using the same paints will eventually lead a painting that looks basically the same as we see now. I don't know if it is the Fair Tax, or some other method of collecting revenue for the government, but I know that simply replacing the current income tax with a new income tax will not help out this country in the long term.
We have a new economy being built by entrepreneurs. It requires new thinking of what type of system will both generate the revenues we need to run the basic services of our government and allows our entrepreneurial economy to thrive.
The odds are that this is simply an attempt by a couple of Republican candidates to shore up their base. I agree with James Pethokoukis:
Making sweeping rate cuts--much less totally scrapping the current tax code and instituting a flat tax or a consumption tax--in the current environment is "unrealistic," Ramesh Ponnuru, a senior editor at the conservative National Review magazine, told me recently. At the very least, it would take an articulate candidate committed in his bones to making the argument for such huge change.
And I see no one like this currently in the mix.
