President Obama and the Sage of Omaha may have been too clever by half with their incessant talk about taxing "millionaires and billionaires." Obamaha's rhetoric may have paved the way for a long-overdue overhaul of the U.S. tax code. But not quite in the way envisioned by The Two Sages. As Stephen Moore notes in today's Wall Street Journal:
'Suddenly, liberal Democrats are making the same argument about the tax code that I've been making for 20 years," laughs former Republican House Majority Leader Dick Armey. "Welcome to the party." Mr. Armey, who along with Steve Forbes has been the torch bearer for the flat tax since the early 1990s, believes that the latest applause line from President Obama that "billionaires should pay the same tax rate as janitors" may be the political gateway to sweeping tax reform.
Mr. Forbes sees an opening here too and says: "The flat tax is the perfect issue for these times. It fixes the economy and doesn't cost a dime." He's right. It's the teed-up GOP response to a jobless recovery and the near-universal sentiment among voters that the tax code is corrupt beyond repair.
If voters opt to send to Washington next year (sorry, Bev, we're having elections!) men and women who are willing to tackle the tax code, then arguments can be made for the fairness of the flat tax:
Done correctly, the flat tax eliminates all double taxation of saving and investment. But if liberals won't accept a lower tax rate for capital gains and dividends, perhaps the grand deal in Washington could be to tax everything at 16% or 17%….
That's why the flat tax is the fairest tax of all. The combination of a single tax rate with a family-size allowance-shielding, say, the first $35,000 of income for a family of four-ensures that everyone would pay the same marginal tax rate above that level. A family of four with an income of $70,000 would pay an average tax rate of about 8.5%, whereas the members of the Buffett billionaire club would pay 17%.
On the GOP trail, Jon Huntsman and Newt Gingrich have tax proposals that "move toward a flatter tax." One candidate moves closer than the others:
But the candidate who comes closest to a true flat tax is Herman Cain, the former Godfather's Pizza CEO. His argument for a "9-9-9" plan puts the current income and payroll taxes in the shredder and replaces them with a 9% personal income tax with no deductions, a 9% net business income tax, and a 9% national sales tax.
That would be rocket fuel for the economy, though the combination of a federal sales tax and an income tax is a big worry. But at least Mr. Cain has super-sized solutions to an economy with super-sized problems.
"I keep waiting for a Republican candidate to take the plunge," says a half-frustrated Steve Forbes. Then he adds one more flat tax selling point: "You know it ends all this crony capitalism in Washington. From now on, if Obama invites you to the White House, you'd know it's because he really loves you."