Lately a growing number of former Communist Bloc countries are adopting flat taxes on corporate and personal income.

It's a marvelous principle. In Bill Buckley's famous example, a man who drives his taxi 60 hours a week should not be taxed more punitively than a man who only drives 40 hours a week. Yet, that's exactly what our progressive income tax does. Additional work pays less and less, as it pushes the worker's added income into higher tax brackets.

So the structure dictates you work only as much as you need to. If you work harder, you'll only get penalized.

There are much bigger implications to this. My old boss liked to use the example of a pop star, in his time, Billy Joel.

Let's say Joel is sitting in his Hamptons mansion, counting his millions on the coffee table with his supermodel wife primping in the mirror. She turns to him and says, Hey, that last album did well. Why don't you make another one so we can buy a house in France?

And Joel says, Eh, I dunno. We've got all we need. The royalties from the music I already have out there will support us as long as we live. Besides, additional income will get taxed away at some ungodly rate. We'll end up with less than half of what we really worked for.

She responds with, Pleeeze?

And he says, Nah, I don't like touring anyway. Too much work.

She lets her negligée fall slowly to the floor.

However, Joel doesn't respond because he's looking at the TV just then, where a reporter announces that Congress just lowered the top income-tax rate by two-thirds. Suddenly, the idea of cutting another album sounds a lot more appealing to Billy Joel. He picks up the phone to call his agent.

i know ... who cares if the super-rich get more money under a flat(ter)-tax scheme? But stop and think what Billy Joel's productivity means to his producer; sound engineers; shareholders of his record company; and the T-shirt printers, arena beer salesmen, and parking-lot attendants as he goes on tour to support that new album.

Billy Joel's just a conspicuous example. All across America there are entrepreneurs who love to make money. They may not live lavish lifestyles; in fact, most of them don't. But to them, the challenge in life is to start and operate businesses for profit. Many don't care so much what kind of business; somebody or some group of investors owns every Supercuts, KFC, lawn service, and gas station you patronize. And when income-tax rates fall, they suddenly find the time to start even more businesses, and by the way hire people who otherwise would not have had a job.

The benefits ripple out all over the country. The only thing that slows it down is, as I remember in the late '80s, a shortage of labor as all the available workers get hired.

However, that's a problem we almost never have, because the kind of growth a flat tax would foster will never happen here.

It's not the Democrats, or economic liberals, as some might conclude, although those people will fight such proposals. Simply put, a flat tax won't catch on because of all the people who have a vested interest in keeping the tax code complicated.

It's the accountants.

Think about what a flat tax would do to them. If you could send your tax return in on a post card, why would you pay H&R Block a plug nickel?  Why would any business employ a top accounting firm, and maybe hotshot consultants on top of that, to help it find ways to keep its tax bill down, if the government simply took 10 percent off the top and stopped there?

Now take the next logical step with me: Who are among the top contributors to presidential campaigns?

Yep.

Without the president leading the way, it ain't gonna happen. Top brass at the accounting firms ply him and all the other candidates with cash to make sure they have the loudest voice and the most direct line to the White House if their business is ever threatened. You and I can't compete. And we're unlikely to take to the streets over this.

I wish I knew a way to make the flat tax happen here, because I don't want to have to learn a Slavic language just to live in a country that maximizes prosperity and opportunity.

Posted by: Michael Rittenhouse at 07:53 PM | No Comments | Add Comment
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