Flat Tax and the Deficit

In response to “Flatten Taxes, Flatten Jobs; Is That Unfair?� Column Right, by Arthur Laffer, Oct. 28:

Flat taxes leave additional dollars in the pockets of the wealthy, which does not necessarily translate into more jobs for the economy. Nor do flat taxes simplify tax laws. The complexity of the tax laws stems from determining what is profit and what part of gross income is appropriately taxed, not from whether there is one tax bracket or several tax brackets.

Consider the Tax Simplification Act of 1986. This government attempt at a near-flat tax turned out to be far more complicated than the tax code it replaced. It did succeed in vastly reducing taxes paid by the very wealthy, while nearly eliminating the few small deductions for the middle class, such as medical expenses, union dues and credit card interest.

I am reminded of Laffer’s last simple idea, the “Laffer curve,� bandied about at the beginning of Ronald Reagan’s first term. This curve showed, in a cute way, how both very low tax rates and very high tax rates produce less government revenue. Reagan used this idea in pushing for lower taxes, not understanding that the part of the Laffer curve with low tax rates will produce less revenue. The result: $2 trillion in additional government debt during the Reagan years, followed by over a trillion in additional debt during the Bush Administration.

ALAN RADNITZ

Hacienda Heights