LETTER: Flat tax's simplicity exaggerated

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I see that Allen Lewis of the Rice Republicans, like many of his flat tax supporting contemporaries, seems unable to distinguish between a tax rate and the means used to compute taxable income ("Flat tax system would make April 15 simple, fair, easy," Feb. 7).

There is nothing inherently complex about the tax rate in use today. With only four tax rates, computing tax owed is straightforward, and is even simpler when one uses the tax tables so graciously provided by the IRS.

The problem of course, is the calculation of the amount of income to be taxed, and it is this area that is always conveniently ignored by the flat tax supporters. In their world, everyone is a salaried wage earner; hence the claims of a "postcard-sized form" and 10-minute tax sessions. Unfortunately, life is not nearly that simple.

An example shows why the pro flat tax arguments make no sense. Consider a wage earner making $30,000 per year, and a self-employed delivery driver who grosses $30,000 per year. In the first case the wage earner has no expenses associated with earning $30,000. At the proposed 17 percent rate, this person would pay about $5,100, and the effective tax rate is obviously 17 percent.

The delivery driver has a much different experience, though. With expenses for gas, oil, insurance and depreciation for the delivery vehicle, this person might take home only $20,000 of the $30,000 he grossed.

Yet Lewis would have this individual pay the same $5,100 in tax for an effective rate of 25.5 percent. Unless Lewis is willing to allow for expense deductions in the earning of income, then the flat tax will be very unfair.

Yet it is precisely the expense deductions that make the tax code so complex.

For every delivery driver there is another who owns cattle, or an oil well, or stocks or a restaurant and bar.

Each of these businesses has its own set of allowable business expense deductions, each one "complicating" the IRS code. Even Rice University is covered by the tax code.

Would Lewis just ignore non-profits, or would they still be required to file statements of income and expenses to prove they are operating as a non-taxable entity?

In actuality, if the flat tax were to pass, there would be far more confusion, lobbying and sweetheart deals as all the special interest groups flocked to Washington to try to get a better deal in the new tax code.

If Lewis is truly committed to a simpler tax code, he ought to consider a consumption tax. No forms to file, no April 15 deadline and best of all, a consumption tax encourages savings over expenditures.

Wayne Herbert

Brown '97

This item appeared in the Opinion section of the February 14, 1997 issue.

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