December 08, 2006

President Brownback's Tax Agenda

Kansas Senator Sam Brownback has formed an exploratory committee for a potential run for President in 2008. From a tax policy perspective, Brownback is most notable for his support for a flat tax. Here's an excerpt from a speech earlier this year:
And I also believe we need an alternative flat tax to keep the economy growing and creating jobs. Not a removal of the current tax code, which I would support, but we've tried that for a long period of time. I think it's time for us to build into the tax code an alternative flat tax. If you want to file under the old tax code system, God bless you, here it is, go ahead. We're going to create an alternative flat tax, 19 percent, no deductions, no credits, no nothing, here's the rate, period. If you want to do it, this is it. You pick which way you want to go. You can't jump back and forth, but you pick which way to go, as a way of growing the economy.
This is hardly an inspiring rallying cry for federal tax reform-- we can't fix the existing tax system, so let's just slap another one on top of it-- but you can see why he would uncork this one in front of an audience. It seems simple, and it sounds like it gives you a choice. Simplicity and choice are both good things, right?

But on a moment's reflection, it should be clear that this idea would clearly be a lot more complicated than he's letting on-- and that it would give people less choice, not more, in the long run.

First, forget about the idea that this plan would leave the current tax system unchanged and just add one new optional feature. As a practical matter, you'd have to repeal the Alternative Minimum Tax to make this choice work-- after all, a tax that says you have to pay at least 26 percent of your income in tax is hard to reconcile with a tax that says you can pay as little as 19 percent of your income--which would mean close to a billion-dollar hit on federal tax collections over the next decade.

Second, a truly optional flat tax wouldn't require you to make a choice and stick with it. Brownback says "you can't jump back and forth, but you pick which way to go." If you plan on being rich enough to take advantage of the flat rate forever, this seems fine. But what happens if you lose your job or become disabled? Paying 19 percent of your entire income in tax is going to seem much more oppressive than the current income tax, for sure.

Forced to confront these details, Brownback would certainly agree (in the first example) that his plan would involve more complication than he lets on, and would also have to agree that forcing a taxpayer to make this choice and stick with it doesn't make much sense.

But he clearly hasn't thought much about these basic implementation issues at all-- and I guess his staff hasn't either, or else they'd have thought of these issues immediately. This apparent unwillingness to think through the basic implications of tax reform ideas is especially worrisome given that he didn't just think this up yesterday. As noted previously in this blog, Brownback tried to impose an optional flat tax on the District of Columbia last year.

Nothing wrong with shaking things up with bold ideas-- but Brownback has been actively pushing this one for over a year and still doesn't seem to have thought critically about whether it could ever actually be implemented. And that doesn't say much for his potential ability to run the nation.


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