Time for CA Flat Tax

Time for CA Flat Tax
By Terry Paulson
2/28/2011

CA Governor Jerry Brown is pushing for serious budget cuts and a tax extension plan, but Republicans are blocking his efforts to bring his tax plan to a June vote. They’ve seen what happens to Republican politicians who vote to raise taxes!

Without such a vote, more cuts will be needed. Instead of trying to get Californians to vote for another “temporary” tax extension, why not try an innovative proposal he once believed in. To be specific, if Gov. Brown wants to get Republicans to sign on to giving Californians a choice that will help balance the budget, let him propose a flat-tax like he did in his 1992 Democratic presidential campaign.

Steve Forbes, author of “How Capitalism Will Save Us: Why Free People and Free Markets are the Best Answer in Today's Economy,” was a Republican presidential hopeful in the same year. Since then, both men have discussed the flat-tax concept and how it could work in the country and in California. Forbes said, "If done right, it would profoundly and positively change the economy in California. A low single-digit rate would unleash creativity,” and boost the beleaguered state economy.

But why should all Californians vote for such a plan?

1. As FDR said, “Taxes…are dues that we pay for the privileges of membership in an organized society.” It’s time for a truly “fair tax” that lets all pay the same “dues” rate! With a uniform sales tax, when you buy more, you pay more. With a flat tax, the more you make, the more you pay, but all pay the same percentage!

2. A flat tax replaces itemized deductions with one standard deduction (based on dependents) that is large enough to allow the poorest to pay no taxes and the rest to pay the same percentage on all earned income above that deduction. Although the popular deductions for mortgages or contributions would end, the lower tax rate would leave more for taxpayers to spend and donate.

3. Max Baucus said, “Tax complexity itself is a kind of tax.” With the hours and dollars invested in figuring out taxes and finding tax-evasive strategies, imagine the joy of filling out your state taxes on a postcard. Simplicity is in! Let’s make taxes simple and lead the way for a national flat-tax.

4. Tired of watching special interest lobbyists vying for exceptions and special breaks? Taking away tax complexity makes their involvement unnecessary. Former press secretary and columnist Tony Snow said in a USA Today column, “A ‘pure’ flat tax--no deduction beyond the standard exemption--would...turn the Washington establishment on its ear. It would guarantee fairness and neutrality by demanding that everybody above a certain income level pay the same tax rate on each new dollar earned. Economists call this the marginal tax rate. It would starve the lobbying community by eliminating its reason for being.” This would turn Sacramento on its ear!

5. With everyone paying the same flat-tax rate, more voters would be cautious about electing politicians who waste taxpayer money on inessentials. When it’s your money they’re playing with, you pay attention. When it’s your neighbor’s money, why not elect big-spenders!

6. If you want private sector growth, vote for a flat tax! Currently, the more productive people are, the more they’re taxed. A flat tax removes the penalties for success and encourages everyone to be as productive as they can be. That means new small business growth and more jobs!

Governor Brown didn’t support a flat tax because he was a supply-side conservative. Brown hated the special interests loopholes and the complexities in the tax code. To develop his plan in 1992, Brown met with conservative economist Arthur Laffer to craft his plan. His thirteen percent federal flat tax was endorsed by both the New York Times and the New Republic.

Now that getting federal legislators from 49 other cash-strapped states to provide a Washington bailout for California’s fiscal mess is becoming less and less likely, it’s time for bold leadership! Proposing a CA flat tax just might unleash bipartisan support in a state known for a never-ending partisan budget impasse. It’s time to let the California Dream soar again on the wings of a flat-tax plan!
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To read another article by Terry Paulson, click here.