Flat tax could be smooth solution

As I wrestle with the IRS this year, I cannot help but believe there has to be an easier way. I don’t think the government goes out of its way to make things complicated, but reading through tax instructions certainly makes me wonder.

One of the concepts that appeals to me is the idea of a flat tax. So, using the Internet, telephone and striking up conversations with family, friends and co-workers I started a discussion. The amount and depth of replies I got was surprising and the topic went far beyond just the idea of a flat tax.

Everybody I talked to seemed to agree that the current system needs a major overhaul. The amount of time and money our government spends on the current progressive system is staggering. The current U.S. Revenue Code contains more than 9 million words. Combine that with deductions, loopholes, exemptions, etc., and add in enforcement of this system and it becomes ridiculous to expect efficiency.

The second most common topic in the discussion was more of a local concern; the notion that out-of-state workers (predominantly on the North Slope) who earn their wages here don’t contribute anything to our state via our own current state tax system. Good point. If they’re injured, they rely on our services. They frequently use our infrastructure. They call Alaska if and when they’re laid off from work. So it seems only fair that they contribute something toward these services. State income tax and sales tax were both ideas introduced, and it was agreed that both (especially a state income tax) would probably prove very unpopular. But how long can we expect the current method of taxing the oil and expecting it to provide for all our needs really work?

Getting back to the idea of a flat tax, there were a few who argued the wealthy should pay more tax. Why? I heard many different versions of the same answer — they owe it to society. Yet again, I ask why? We live in a society that encourages competition among business. Our government pleads for innovation. Why then do we state that success warrants a penalty? One person even went so far as to state that in general, the wealthy get that way by oppressing the poor.

So if I create a product or a business that people want I am automatically a villain? That’s crazy! It seems to me that if my business grows and I am helping to improve my local economy through jobs and currency in the marketplace, I should be the good guy. What’s my incentive to work hard if my reward is the government labeling me the evil rich guy who needs to be squeezed to pay more taxes?

Let’s face it, when politicians talk to us about the rich paying more taxes, their only objective is to buy your vote. The middle class and poor make up a far larger percentage of the population. They can demonize the wealthy and convince you that the wealthy owe it to us to pay more. Ironically, several — if not most — of these same politicians are quite wealthy themselves and enjoy many of those loopholes that keep their money in their own pocket and not in the hands of Uncle Sam. And if we begin to shake down business owners for more taxes, who are we really hurting? Does anybody honestly think those losses are simply absorbed? It means layoffs, less hiring and often times higher prices that all have a spiraling effect within the economy. A flat tax means a far simpler code. It also means no more deductions.

Why is the government in the business of subsidizing home ownership? A good friend asked this. When you look at deductions, it begs the question, why not just charge less in taxes to begin with and not worry about the complications of deductions? It also means more people are honest with their taxes and reduces the amount of money the government has to spend in enforcement and tax review. That alone has the potential to save us billions. Countries that have instituted a flat tax have seen increases in generated revenue in amounts up to 25 percent. Another benefit is that an increase in tax affects all taxpayers across the board. This means that the government can’t reward, appease or otherwise target any specific group of people. Also, any government spending would be much more closely scrutinized and would therefore force the government to be more careful with our money.

It could be argued that the wealthiest of us have the most disposable income and can therefore afford to pay more. And perhaps a poverty level could be established wherein only those above that amount pay taxes. Surely those people who are trying to survive paycheck-to-paycheck would not have the disposable income to pay any amount, let alone a flat tax. I would also agree that those with the most amount of money have lots to gain by donating to charity and helping their fellow man.

But when we say that the government should take their money and best decide how to spend it, I remain highly skeptical. The power we give to our government to take should be as limited as possible. Otherwise, we begin down a treacherously slippery slope. Besides, given the federal government’s track record for spending and efficiency, why do we think they’re the best people to play Robin Hood?

Ben Compton is a Palmer resident and publishes his column under the tagline “Compton’s Corner,” the same title used by his grandmother, Phyllis Compton, a longtime Frontiersman columnist.