The Straight Dope 

to run 2-23-96

FLAT LINERS FOR THE FLAT TAX

Re your column on taxes [January 26], I was curious about some of your conclusions. You say "people making $50,000 to $75,000 ... paid $7.6 billion more" [after the 1986 tax reform]. What was the average increase per person? Or was there an increase in the number of people in this bracket, which would have increased the total collected? How much was the tax increase on these people as a percentage of income? You don't say.

In your conclusion you start with a supposition of a flat 20 percent rate (higher than any I've heard proposed) without any mention of the automatic exemption of the first $20,000 to $30,000, which would result in the poor paying no tax at all. I assume this was a lapse and not an act of deliberate mendacity.

Yes, Forbes wants his taxes to go down. I want mine to go down too. Under every flat tax proposal I've heard (except yours), mine would go down dramatically. Doesn't mean I'm going to vote for Forbes, but right now I find him more honest than you.

Can you explain why we should have a graduated tax system in the first place? Is it to make sure that everybody ends up with the same amount, regardless of effort? Isn't that called socialism?

Following this logic, shouldn't rich people also pay more for everything else? Why not a sliding scale for bus fare, Big Macs, movie tickets, etc? After all, the rich can afford more.

Why do we need an income tax in the first place? Why don't you consider the merits of the "Liberty Amendment," which would abolish the IRS? --Jim MacQuarrie, via the Internet

Way to go, Jim, defend the rights of the rich! Shows you what a great country we've got here. Also shows you that whereas left-wingers are jerks, right-wingers are nuts. To be kind though, tax "reform" is like a date with Julio Iglesias: it takes you a while to realize you've been screwed.

Let me explain. Following the 1986 tax reform, the average income tax paid by somebody in the $50,000-$75,000 bracket indeed went down, and I mean way down--$1,100. The total tax take for that bracket went up $7.6 billion because there were many more taxpayers in that range in 1987.

Ha, you say, Cecil was using statistics to lie! Uh-uh. Fact is, taxes for virtually all tax brackets went down. Yet the total tax collected went up. How was this miracle accomplished? By eliminating many popular tax deductions. This forced millions of Americans into higher brackets, so they paid more tax. Example: elimination of the IRA deduction. If you and your spouse (a) both worked, (b) made a total of more than $50,000, and (c) had previously both taken the maximum IRA deduction, in 1987 your taxable income increased $4,000 even if your real income stayed the same. Assuming two kids, $53,000 in joint income, and $9,000 in deductions in both '86 and '87, your taxes went up $862.

Taxes went up for most affluent Americans. In 1987 they reported an additional $300 billion in income, of which maybe two-thirds stemmed from closed loopholes. As a result, people making from $50,000 to $1 million paid an extra $24 billion in tax. OK, nobody's bleeding for a $500,000-a-year lawyer. But look who paid less tax: those making under $50K (average tax cut: $5 to $867) and those making $1 million and up (average cut: $214,000). Like I say, some reform. Other points:

(1) Forbes claims his flat tax rate will be 17 percent. Most knowledgeable observers say if that happens the government will go broke. The real flat tax rate will have to be at least 20 percent. The working poor will get screwed because they will lose the earned-income credit, which lets them collect a tax "refund" greater than the amount of taxes withheld. You don't have to be a genius to figure out that if taxes for the Forbes crowd go down, they have to go up for somebody else.

(2) The income tax is progressive for several reasons, the cynical one being that there are a lot more poor voters than rich ones. The practical reason is that a progressive income tax overcomes the regressivity of the sales tax, which falls most heavily on the poor, and the property tax, which falls most heavily on the middle class. Some analysts say total taxes as a percentage of income are about the same for all income levels.

(3) No income tax at all? Fine. When the guys in the military come looking for their pay, we'll tell them to see you.

--CECIL ADAMS

Is there something you need to get straight? Cecil Adams can deliver the Straight Dope on any topic. Write Cecil Adams at the Chicago Reader, 11 E. Illinois, Chicago 60611, or E-mail him at cecil@chireader.com.

Art accompanying story in printed newspaper (not available in this archive): illustration/Slug Signorino.

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