I heard Dan Mitchell speak at a Fraser Institute event a few years ago. He is a big supporter of the flat tax. I am too. It would simplify the myriad of forms we have to fill out and we could get rid of a lot of civil servants. It also gets rid of the millions of little loopholes the government puts in. It is a fairer system.
As I always say to HM Minister of Finance Flaherty, when I see him, flat tax , flat tax, flat tax, flat tax, flat tax, flat tax, flat tax, flat tax, flat tax, flat tax. He usually just smiles.
Tax reform may seem like an impossible dream, but it can happen.
Most people support tax reform because they want fairness. The current system is riddled with corrupt provisions, and the tax treatment of upper-income households is a good example. Sometimes rich people are hit with punitive tax rates. Many wealthy taxpayers, though, scam the system by using lawyers, lobbyists and accountants. Either way, funds are allocated inefficiently.
With a flat tax, by contrast, there are no special preferences or special penalties based on income. If Bill Gates has 100,000 times as much income as the average taxpayer, he’ll pay 100,000 times as much tax. Not more, not less.
Economists like the flat tax since it would increase growth and job creation, while also making the country more competitive. This is because a flat tax means a low tax rate. By replacing high tax rate with a low flat rate (probably 17%), the flat tax will encourage more productive behaviour. Politicians understand that high tax rates on tobacco reduce smoking, so why don’t they realize that high tax rates on work and entrepreneurship discourage growth?