Every now and again I get the following: “Oh, you’re a tax attorney? What do you think of [insert name of random Congress man/woman]’s flat tax / consumption tax proposal?”

My stock answer…”I think that it’s great!” And I give this answer without having even read any of these plans cover to cover.

The latest such question came from Scott in an email yesterday and here is my reply…slightly edited for wider publication.

“Scott:

[irrelevant chit-chat omitted]

I think that the [unnamed Senator’s] press release is [hogwash]. It got him his headlines and I suspect that those headlines were all that he really wanted.

I am a pretty simple guy. I focus on money. When you peel away all of the rhetoric, the only purpose of a tax system is to apportion the burden of paying for government among the governed.

As I mentioned on Friday, I start with the budget. It is way too high. If you want to reduce tax, reduce the budget. Of course, no one seems to want to listen to that line of argument — the Dems want their “new deal entitlements” and the Reps want their “military industrial establishment”. Both cost money. In other words (cynically), the burden of paying for government ain’t getting any lighter.

So, if the cost of government is fixed or growing, the only way to reduce middle america’s share of that cost is to increase someone else’s share of that cost.

Will it be those poorer than the middle class? Good luck. No. The only way to reduce the burden borne by the middle class is to increase the burden borne by the upper class.

I will make only one definite statement on this issue: “Little Bush DOESN’T want to raise taxes on the rich”.

As far as [Unnamed Senator] goes…I can’t tell from the press release what he wants to do, but let me focus on his apparent underlying premise — that the rich aren’t paying their far share of the burden….

Go here: http://www.house.gov/jct/s-2-06.pdf

Turn to page 43 (of the printed book or 46 of the PDF) and look at Table 2.

Now my math may be off (after all, I am away from the office), but it seems to me that those that make more than $200,000 per year pay more than 50% of the collected tax and those that make more than $100,000 per year pay a little more than 80% of the collected tax.

Now those numbers are cute and all but let’s look at the other column too. The number of returns filed in the two top income classes — $100K and $200K per year — accounted for only 14% of the total returns filed. The folks filing returns showing $200K or more accounted for less than 3% of the returns filed.

So taking the liberty of equating return filers with population — I think we can at these huge samples (after all its not like there are materially more high-income non-filers than low-income non-filers; in fact, I wouldn’t be surprised if the reverse were true) — the top 3% of the earners are paying 50% of the cost of government and the top 14% of earners are paying 80% of the cost of government.

If [unnamed Senator]’s plan is to force these top 14% folks to pay a higher percentage of the cost of government, I wonder how much more (if any) is fair.

If [unnamed Senator’s]’s plan does anything other than increase the pain borne by the top 14%, then his plan hurts the middle class rather than helps it.

I assert (perhaps naively) that one day the 86% (those that I lovingly refer to as Mr. and Mrs. Middle-America) will wake up and tell [unnamed Senator] and Little Bush and all others like them to go screw themselves.

But if the 86% continues to show the political aptitude of a walnut and lets something like this pass, all I have to say is “Hooray!” I am ready for the 86% to start paying a bigger piece of the cost of government.

Maybe then we can focus on cutting the cost of government!

— JJ”

For those that want further reading on the subject, two great places to start are:

http://www.cob.sjsu.edu/facstaff/nellen_a/txrefupd.html

and

http://taxreformpanel.gov/

By the way, I agree with Prof. Nellen’s observation that a key fix to the system is to create a system that is easier to enforce so that we can close the gap between what should be paid and what is actually paid. If we actually collected what is actually owed, we would likely have enough to cut everyone’s taxes.

Happy Reading.