The Flat Tax (Hoover Classics) (ISBN 0817993118)

Amazon.com Review:
Here's the book that started the flat tax debate back in 1985, updated in an edition for the 1990s. Robert Hall and Alvin Rabushka present their plan as fair, efficient, simple, and workable. All income in the United States would be taxed once at the rate of 19 percent, and there would be generous allowances for families. This system and its postcard-sized tax form would wipe out $100 billion in annual compliance costs and demolish the Washington culture of lobbyists, whose entire industry depends upon tampering with the rules of free enterprise.

Flat and Simple:
The title of this book is not quite accurate. Hall and Rabushka want flat and simple taxes. They want to flatten out rates and simplify, well eliminate the maze of complex exemptions in the existing tax code. What we have here is a point by point explanation of a program for scrapping the tax code, followed by a useful Q+A section. Some of their claims regarding their reforms are a bit exaggerated. For example, the claim that "every study we can find shows that lower tax rates on businesses and employees increases the supply of labor, capital, and entrepreneurship". As an economist I agree with their conclusions, but there are some studies, albeit faulty ones, that contradict the above argument. Professional opinion is not uniform. The flat tax is an idea that is good economic policy, but bad politics. Our current tax system does detract from economic development. There is no economic justification for collecting taxes through such a complex code. Our tax code is maintained in part by certain special interest groups (tax accountants and tax attorneys) and the politicians who they pay off (Democrats). There is little we can do to reason with people who are feeding off of the tax compliance industry. They are on the take and will not listen to reason. Our tax code is further maintained by rank and file Democrats who believe that we can achieve some sort of `social justice' through the tax code. These persons are not bought off, and some of them will listen to reason. This is how we can get rid of the tax code: by shifting public opinion. If enough people come to see the tax code for what it really is, then the political balance will shift against the tax compliance industry. There was a serious drive to scrap the tax code in the mid 1990's, which Clinton blocked. Scraping the tax code would not lead to Nirvana, but it is good policy. Scrapping the tax code would also do justice upon those who have been leeching off the rest of us all our lives. The accountants and lawyers who make money off the tax code are parasites. Scrapping the tax code would ruin many of them, financially, and they deserve at least that. I should be clear that this last remark was a moral/political/personal statement, not a professional economic opinion. The Flat Tax is an important book because it can have an impact on public opinion. It can be a part of scrapping the tax code.

Non-Political Review:
I'm not going to debate the merits or failings of the flat tax in this review. A book review is too short for that. The question is did this book clearly explain what the flat tax is, how it will work, what the authors believe the benefits are and the logic behind their arguments? Yes to all the above. Whether or not you think you'll agree, or whether or not you end up agreeing is beside the point. The flat tax is a suggested tax reform and if your interested in tax reform this is a great book to understand the nuts and bolts of the flat tax that many of the flat-tax proponents are supporting. If you read this, you will understand what is being debated when the flat tax is being discussed.

A Better Kind of Flat Tax:
I've assumed, perhaps arrogantly, that I understood what the advocates of a "flat tax" - Steve Forbes and others - were proposing, but I finally decided to skim over this classic starting-point of the discussion. And guess what? They're proposing just what I feared, a regressive $$% on all "income." The discussion is not really so new, of course. Methods of taxation were discussed and experiments aplenty were conducted in the 19th C, especially during the Civil War. The same ardent plus and minuses were enumerated. Old Solomon was right: There's nothing new under the Sun. But some of the more reasonable thinkers of that remote Civil War era, notably Conressman Justin Morrill of Vermont, had interesting ideas, including a "flat tax" on property. This was vehemently opposed by some as "confiscation" and by others as unfair to farmers. The former were indubitably correct; taxation is confiscation of wealth, but then isn't wealth is confiscation of well-being? The latter objection, that of land owners, was also correct, but only because the thinking of the era was limited to the recognition of property as land and perhaps improvements on the land. But how about a modern "flat tax" of $$% on all kinds of property except perishables - land, improvements, stocks and bonds, intangible business assets, art collections, appreciable goods, etc. Sure it might be hard to assess and collect, but it couldn't be any harder than the current income tax mess. And how could anyone call such a tax unfair?

A Good Idea!:
It's hard to believe this idea has been around so long, and we still don't have it! It's simply the fairest, simplest, most efficient, and workable plan yet proposed! Read about it, legislate, and maybe we won't have to waste 2 weekends a year on that pesky 1040.