Monday, May 23, 2005

Fair taxation

Forbes (June 6) reprints Steve Forbes' testimony ("The Federal Income Tax: Start Over!") before the President's Advisory Panel on Federal Tax Reform. He does a fine job of promoting his favorite idea, the flat tax to replace the federal tax collection apparatus.

"There isn't a human being alive who knows what's contained in the federal tax code. To put it in perspective: Abraham Lincoln's Gettysburg Address, which defined the American nation, is 272 words in length. Our Declaration of Independence is some 1,300 words. The Bible, which spans several thousand years of human history, is 773,000 words. But the federal tax code, with all its attendant rules and regulations, is 9 million words and rising.

"Since 1986, when the last serious attempt at tax simplification was made, the code has been amended 14,000 times. Its length has grown by 3 million words ...

"Billions of hours of lost productivity -- the equivalent of 3.3 million full-time jobs are squandered on tax compliance. At last count, A,ericans spent a staggering 6.6 billion hours perparing their tax forms."

Two obvious questions are these: 1) How in the world does the U.S. economy muster a respectable performance in light of the federal tax monstrosity? and 2) How did we get into this fix?

Forbes refers to his flat tax proposal as "fair". But, because no one can agree on what is or is not "fair", we get a code that is infinitely complex -- so much so that the assessments or discussions of "fairness" become buried in complexity and the result is incomprehensibility and ambiguity.

We invoke the fairness standard, we cannot define it, and we do what we do as a result.