Policy Spotlight: Flat Tax

"The wealthy need to start paying their fair share." One of the most common refrains of liberal Democrats, no matter the subject, implying that it is inherently unfair for the wealthy to not be giving more of their money to support the government--and is, for many Americans who can only dream of being as rich as Bill Gates or Warren Buffett, an appealing argument. It reframes the entire debate away from the boring details of economic policy. How according to one figure, the top 10% of income earners contribute 70% of federal tax revenue. Or how, as John Stossel wrote, "[i]f the IRS grabbed 100 percent of income over $1 million, the take would be just $616 billion." Not even a drop in the bucket compared to $18.4 trillion in national debt, and just enough to pay for the current budget deficit--for one year. Good luck getting the millionaires and billionaires to stay in the country and work just as hard for that wealth next year.

But fairness is inherently a much more appealing concept, and not just because of the lack of numbers. America since its founding has been known as a fair and just nation, and the idea that a few people can have expensive cars and multimillion-dollar mansions, while many people are struggling just to scrape by, just feels on its face to not be right. Why shouldn't the government step in and do something about the imbalance?

The reason is twofold. For one thing, proponents of this approach can easily lose sight of the fact that the tax system, stretching back to ancient times, and as expressed both by Article I of the original Constitution and the 16th Amendment, was never designed to be some arbitrary vehicle for government redistribution, but rather the primary method of raising money to fund the government. Citizens living under any government's protection are entitled to basic services, such as a military to provide for defense against foreign, hostile incursions; transportation and infrastructure, for the exchange of individuals, ideas, and products; and police and fire departments (in America, at the state and local levels). Taxes are an integral component of the funding of these services, which everyone enjoys. What taxes are not for is taking from some the government deems to have "too much", not for funding reasons but simply because the government deems it necessary to ensure equality of outcome (rather than opportunity).

As important as this distinction is, however, it is the second point that truly undermines the argument about paying a "fair share". Taking more money from some citizens, not merely in dollar amounts but in percentages, is in fact the height of unfairness, taking as it does ever-larger shares from people who, in many cases, worked their entire lives to get to where they are today in terms of wealth. The truly fair method of taxation, the only way to ensure a respect for both fairness and the entire intent of taxation, is to tax everyone at the same rate. Not the same dollar amount--10% or 15% of $30,000 is of course much less than of $1 million--but a single percentage of income for every American, of course exempting those at the very bottom of the income ladder. This method respects justice, fairness, and fiscal necessity, while (through low tax rates) promoting strong economic growth.