In a July 2005 Backgrounder (requires Adobe) for the Heritage Foundation, Dan Mitchell explains that “a flat tax is simple, fair, and good for growth. Instead of the 893 forms required by the current system, a flat tax would use only two postcard-sized forms: one for labor income and the other for business or capital income. Unlike the current system, which discriminates based on the source, use, and level of income, a flat tax treats all taxpayers equally, fulfilling the “equal justice under law” principle etched above the main entrance to the U.S. Supreme Court building.”
According to Mitchell, the principle advantage of the flat tax are growth and fairness:
1) Growth. “Many economists are attracted to the idea because the current tax system, with its high rates and discriminatory taxation of saving and investment, reduces growth, destroys jobs, and lowers incomes. A flat tax would not eliminate the damaging impact of taxes altogether, but by dramatically lowering rates and ending the tax code’s bias against saving and investment, it would boost the economy’s performance when compared with the present tax code.”
2) Fairness. “(T)he most persuasive feature of a flat tax for many Americans is its fairness. The complicated documents, instruction manuals, and numerous forms that taxpayers struggle to decipher every April would be replaced by a brief set of instructions and two simple postcards. This radical reform appeals to citizens who not only resent the time and expense consumed by filing their own tax forms, but also suspect that the existing maze of credits, deductions, and exemptions gives a special advantage to those who wield political power and can afford expert tax advisers.
Mitchell writes that a flat tax and a national sales tax “are different sides of the same coin.” Either is obviously preferable to the current federal income tax. For more information about the FairTax, visit Americans for Fair Taxation, or Neal Boortz’s book.