Martin Scorsese once said about his work:
There’s no such thing as simple. Simple is hard.
As taxpayers, that’s what we want, right, simple? I firmly believe that it’s the complexity of the Tax Code that frustrates taxpayers the most – not so much the actual dollars (though I get that we’re not terribly fond of those either). But getting there – to simple – is hard.
The candidates for the GOP nomination for President are finding out exactly how hard as they unveil their respective economic plans – each of them touting simplicity as their ultimate goal.
Former pizza mogul Cain introduced his 9-9-9 plan with mixed results: taxpayers were intrigued by the idea while Cain’s opponents poked holes in it during the latest presidential debate. The thrust of Cain’s plan is that we need to ditch the Tax Code and start over with a mix of flat taxes: a 9% individual income tax, 9% national sales tax and 9% corporate income tax.
Today, Texas Gov. Rick Perry ramped up the discussions on tax reform by pitching his plan. Perry echoed that he, too, wanted to start with “scrapping the three million words of the current tax code.” However, he would replace the Code with a single flat tax. He said, about his plan, “I want to make the tax code so simple that even Timothy Geithner can file his taxes on time,” making reference (and yes, it’s funny) to Treasury Secretary Geithner’s infamous tax woes from his stint at the IMF.
Perry didn’t offer any further details on his plan but is reportedly being advised by former GOP presidential candidate Steve Forbes, a name that might ring a bell for my readers. Forbes suggested a flat tax during his run at the nomination in 1996 (and again in 2000). Forbes’ proposal included a $36,000 exemption for families and a flat tax of 17% on the remainder.
Historically, the flat tax has attracted some interest from voters but ultimately hasn’t caught on a solid economic platform. Opponents point to the regressive nature of a flat tax as punitive for the lower class (though Forbes would argue that the exemption should help ease those concerns), making many taxpayers uneasy about the plan. However, a bigger obstacle is the issue being debated over and over (and raised in my post on Occupy Wall Street): taxpayers love their deductions too darned much. A flat tax means saying goodbye to your mortgage interest deduction, your student loan deduction, your medical expenses deduction… you get the picture. And I don’t know that taxpayers are really ready to give those things up.
Whether the flat tax will woo voters this time around will, I suspect, hinge largely on the details – and Perry hasn’t released those yet. Adding to the worries over eliminating deductions, taking a too big bite on the rate will scare away middle-class voters while a too-small bite will raise concerns among fiscal conservatives about paying the bills: no one wants to grow the deficit.
A simple solution? Maybe not so much.
