Over the years, I have asked a number of liberal friends if they would take this deal. They would get a pot of net new government spending of some amount--say 1% of GDP--to spend any way they like to help the poor. But in return, they would have to let me have a low-rate, consumption-based tax system and I would agree to raise taxes enough to pay for the additional spending. It seems like a free lunch to me, but I've never found a liberal willing to even consider the deal. They are too wedded to maintaining steeply progressive tax rates on income as a matter of equity.I'd probably be more willing to do this than most. Europe shows that it's definitely possible to have less progressive taxation without sacrificing social equality, and if the deal included much more state support for union organizing it might be worth doing. When you get down to it, everything suggests that strong unions are a better tool in terms of egalitarianism than are progressive taxes, and a good safety net is similarly quite helpful. These are bigger priorities than maintaining a (nominal) progressivity in the tax system, in my opinion.
The only problem I have with flat tax arguments is this: everybody knows the reason why the rich pay less in taxes than they're supposed to is because they have the resources to find loopholes/tax shelters/etc. and thus get out of part of their societal obligations. If we were to flatten the income tax, I don't understand the mechanism by which the wealthy would just stop trying to find ways out of paying their taxes. Lowering the top bracket from around 70% in 1980 to about 40% now doesn't seem to have sated the desire for wealth among wealthy. It's only natural that they'd want to keep as much of their money as possible--everyone wants that--but while flat-taxers insist that making the tax code flatter would necessarily make it "fairer" and less susceptible to fraud, I am deeply pessimistic. If we were to establish a flat income tax at say, 22% and simplify everything to the extent that there weren't any huge loopholes in the tax code, it could perhaps work for a time. But, eventually, it's just the nature of these things that loopholes get added, the wealthy will make donations, and it will all go back to the way it was, only now the rich really would be paying less than the average person, proportionally speaking. It's not like there isn't an argument in favor of regressive taxation, but it's not exactly a political winner. And given what we know of de-progressivizing income taxes, is there really grounds for debating this scenario? I'd be happy to hear how Congress would suddenly and scrupulously enforce tax justice after adopting a flat tax, because if they were so committed to that principle, they could put it into practice at any time, perhaps as a trial run for people like me who don't think it could be done? What's more, is it really realistic to think that conservatives would stick to aggressive enforcement of a flat tax system? This principle doesn't exactly hold sway on the right these days. I think I'd more seriously consider it if the right was constantly harping on tax cheats in addition to complaining about high tax rates, as a part of a broader argument about social justice (i.e. you should pay what you owe for now, and we'll do our best to make that more fair, but breaking the law is unacceptable). I'm not on board with this sort of reasoning, but it is debatable. Instead, you get stuff like George W. Bush arguing that rich people are going to get out of taxes anyway, so we should just lower them on the wealthy. There are many words one can affix to that argument, but just isn't one.
However, I have no real objection to Bartlett's shifting some of the tax load onto a VAT. Flattening what's left has some problems, as I see them. Any successful tax system has to be predicated upon the assumption that people are going to try to cheat it every which way they can, which the VAT is. The flat tax seems to skirt this reality, and this is why I remain suspicious of it.
