A Primer on the Flat Tax and Fundamental Tax Reform


Originally posted on International Liberty:

In previous posts, I put together tutorials on the Laffer Curve, tax competition, and the economics of government spending.

Today, we’re going to look at the issue of tax reform. The focus will be the flat tax, but this analysis applies equally to national sales tax systems such as the Fair Tax.

There are three equally important features of tax reform.

  1. A low tax rate – This is the best-known feature of tax reform. A low tax rate is designed to minimize the penalty of work, entrepreneurship, and productive behavior.
  2. No double taxation of saving and investment – All major tax reform plans, such as the flat tax and national sales tax, get rid of the tax bias against income that is saved and invested. The capital gains tax, double tax on dividends, and death tax are all abolished. Shifting to a system that taxes economic…

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About Mike
A resident of the “30 square miles surrounded by reality,” I spend most of my time teaching economics and statistics to undergraduate students. I enjoy, naturally, economics and business, but also science (I was once an astronomical observatory assistant), politics, photography, food, travel and sports. Madison has grown quite a bit since 1978 when Governor Lee Dreyfus made that remark. According to Wikipedia, Madison is 67.3 square miles of land and 16 square miles of water. Visit http://thisgotmyattention.wordpress.com/about/ for one of my favorite views of the isthmus. Or, why not come visit us! http://visitmadison.com

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