Rick Perry will unveil his flat tax proposal tomorrow. Now, the big knocks against the flat tax are that it will either be regressive—meaning it will cut taxes on the rich and raise them on the middle class—or it will be a big revenue loser. Here is Team Romney in the NYTimes trying to explain their guy’s past anti-flat tax position:
Gail Gitcho, a Romney spokeswoman, said there was “no inconsistency” in his position. She said he could support a flat tax that did not raise taxes.
But when asked about the many flat-tax plans that have been floated in the last two decades, Romney aides said they could not recall any that might pass muster with Mr. Romney’s requirements. … They also do not dispute the notion that a flat tax could never generate the same amount of tax revenue while also maintaining the same relative burdens on the wealthy and the middle class. “You can have a flat-tax system that retains elements of progressivity, but I can’t say whether it would retain the same level of progressivity and same level of revenue,” one aide said.
Back in 2005, economists John Goodman and Laurence Kotlikoff took a shot at dealing with the regressivity issue. They proposed some modifications to Steve Forbes’s 17 percent flat tax plan, which also had a $46,000 exemption for a family of four. Goodman would a) lower the rate to 14 percent, b) eliminate the across-the-board exemption for high earners and use that money for a rebate to the bottom third of earners, and c) uncap the payroll tax.
What conservatives most want is an uncomplicated system that taxes income only once (when it is earned) at one low rate. Liberals are more concerned about progressivity. They want the rich to bear more of a burden than the poor.
The left objects to most consumption tax proposals because they are not progressive. Low- and middle-income people would pay a greater share of what they earn than rich people. What we are proposing is more progressive than the Forbes flat tax. It’s also more progressive than the current system. Using economic modeling, Kotlikoff and I found that under our flat tax the rich would bear more of the burden than they currently do.
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