FLAT TAX . . . FAIR TAX

Now that we are not in an election year, it is a very good time to have a reasonable, practical discussion on the issue of a flat tax. Many times during election periods, the flat tax concept gets drowned out by all of the political rhetoric. Now is the time to have the debate. Is the flat tax good, fair, right and achievable?

I believe that having a flat tax rather than the present tax system is a great idea. I believe the flat tax is the only way to get us out of the present grotesque, awkward, cumbersome and socialistic tax system we have now. The flat tax is the only way to make sure the extremely wealthy pay something rather than "working" a system where they pay next to nothing. The flat tax is the only way to make sure there is fairness. It is estimated that all taxes (national, state and local) amount to 35% of the net national product. This is the highest ever in the U.S. History! We must do something.

A good place to start on the flat tax would be to have a flat tax across the board of 15%. This would be 15% on all new income generated. This would include salaries, wages, dividends, stocks, estates and all capital gains. This 15% tax would be for everyone, every business, every corporation. This 15% flat tax would allow for no loopholes from the rule. The flat tax needs to be simple, fair, and an overall reduction in the government’s take.

I would suggest that a family of four would not pay on their first $30,000, thus the first $30,000 would not be subject to the 15% flat tax. Families would only be able to claim deductions for their home mortgages and charitable contributions. The interest on the first home mortgage and charitable contributions would be the only deductions allowed. If we allow any other deductions, it would become pandora’s box and we would eventually degenerate downward to our present poor system.

There are those that say the flat tax is unfair. They say the wealthy get a free ride in a flat tax system and that everyone should have to pay their fair share. They really do not mean fair share. They really do not mean equal pain. What they really want to do is punish the upper middle class and wealthy. They want to punish those in the upper ranks and this reeks of socialism. They want there to be pain for not being poor. They believe if someone has succeeded, then they "owe us." I disagree. President Abraham Lincoln said back in 1863 that, "we cannot help the wage earner by punishing the wage payer." Lincoln was right on target.

In a flat tax system, the upper middle class and wealthy would pay more dollars . . . more tax . . . but not more pain.

The following is an example of three families on a 15% flat tax.

Family #1- The Smiths are a family of four. Mr. and Mrs. Smith have a combined gross income of $35,000. They do not pay a tax on the first $30,000. Therefore, they pay 15% tax on only $5,000. That dollar amount comes to $750.

Family #2 - The Joneses are a family of four whose combined income is $90,000. The Joneses do not pay on the first $30,000. Therefore, they pay 15% flat tax on $60,000. This $60,000 at 15% is a total for the Jones of $9,000.

And finally . . . Family #3 - The Adams combined income including salaries, stock options, dividends and stock market success for the year comes to a gross income of $500,000. The Adams (like everyone else) will not pay the 15% flat tax on the first $30,000, so they will pay on the amount of $470,000. The 15% flat tax on $470,000 is $70,500.

In review, the Smiths pay $750, the Joneses pay $9,000, and the Adams pay $70,500. So, as you can see, the wealthy do pay more, the less fortunate do pay less, and the middle class is in the middle. This is the way it should be. We must totally throw out the present system that does not work that punishes the achievers, and that collects way too much money from our families. Families know how to spend "their" money better than government does.

An example of a flat tax is our county’s present ad valorem property tax. In our county, every household pays at the same rate. There is no punitive tax which rises on the moderately high priced homes. Whether a citizen in our county lives in a house worth $40,000, $100,000, or $350,000 . . they all pay the same flat tax on their property. It is simple, it is clear, and it is not "junked up" with countless deductions and loopholes. The wealthier homeowner pays more in raw dollars on their property tax than on a starter home.

In Washington, D.C., our President pledged to lower taxes on the middle class and "stick it" to the "evil wealthy class." We found out after the election that the "wealthy" were actually families who made $40,000! This is wrong. There are also those that say the flax tax must be revenue neutral, meaning that whatever the federal government is pulling in now under the present system, must be the exact same amount under a new flat tax. I disagree because adhering to the revenue neutral concept says that government is bringing in the right amount of money today. The revenue neutral philosophy states that government deserves the present dollars, that the families are paying the correct amount, and that the federal government should be as big as it is today. Most families believe government, especially in Washington, D.C., needs to get smaller, less obtrusive, and less powerful.

The flat tax is the right way for our county to go into the next century. It is cleaner, fairer, less confusing and nondiscriminatory. The American family will be able to keep more of "their" money and will not be spending negative energy on trying to figure out their taxes every year. In a recent poll, 75% of all Americans said they wanted a different tax system. I am frankly surprised, that number is not in the 90% range. The flat tax would have everyone paying equally. Whenever businesses make decisions based solely on our web of tax codes we know we are off base. The new tax code should be able to be written on one sheet on paper.....one sheet of paper.

Only through a complete overhaul of our present tax system can we make a difference. A flat tax will help everyone throughout our economy. From the recent graduate, to the blue-collar and white-collar worker, to the housewife or the C.E.O., they all will win. The new tax system will create capital and jobs. It will lower the unemployment, interest and inflation rates. It will ripple through the economy from top to bottom. When the American family is allowed to keep more of their money, they spend it, save it, and invest it. This creates an enormously explosive and productive economy. It will give more power and freedom to our families and reign in control of the federal government. The time for the flat tax is now.

Andrew W. Coy

Lee County Commissioner

11/24/97 District #4