A Rose by Any Other Name?

Years ago, the possibility of adopting a 28% “flat” tax on income (generally no deductions allowed) was seen as the solution for fixing the complex tax system. Today, there is outcry over a tax calculation that preserves a preferential 15% tax rate for dividends and capital gains, allows deductions for home interest and charitable contributions, but generally taxes income at 28%. A modified version of the flat tax? No, it’s called the AMT.

That is Kenneth Barkoff’s letter in the March 8 issue of Business Week, Barkoff is a tax specialist.

Some people complaining about the Alternative Minimum Tax may be objecting to its unfairness, as not everyone falls under its rubric. People with high deductions, as might arise from a second home, are the most likely victims. Other objections cite the height of the rate. Yet other critics may not like the process through which the AMT became so binding, namely the so-called Bush tax cuts, which made more people eligible for AMT status.

Gary Becker’s analysis suggests that a flat tax, if it is efficient, also will make government larger in size. Efficient taxation will make it easier to afford large government.

My take: I’ve never understood the conservative/right-wing obsession with flat taxation. I don’t favor arbitrary taxation per se, but we already have something resembling a flat tax right under our noses, and no one is very happy with it.