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Tuesday, August 23, 2005

Breaking the Code

One Simple Rate
A flat tax would unleash a stupendous economic boom.

BY STEVE FORBES
Sunday, August 21, 2005 12:01 a.m. EDT

A major domestic battle looms this fall, when tax reform--a centerpiece

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of the president's bold domestic agenda--will finally be on the table. The President's Advisory Panel on Federal Tax Reform is expected to release its findings by the end of September. After the political shellacking the White House took on Social Security, the administration will be strongly tempted to take a conciliatory path that supports only superficial reforms, essentially preserving the status quo of our hideous income tax code.

Such a course would have perilous consequences, economically and politically. In fact, the administration has an opportunity here to boldly retake the initiative, to recover lost political support and thrust an already decent economy into high gear and, at the same time, make America better able to meet intensifying competition from China, India and others. How? By junking the entire federal income tax code and starting over with a flat tax. A growing number of countries are doing this--and so should we.

The current system is beyond redemption, a beast whose complexity, confusion and outright unfairness have corrupted our economy and society. Americans waste more than $200 billion and over six billion hours each year filling out tax forms. They engage in all kinds of useless economic activity intended to take advantage of the code's maze of deductions and to reduce taxes--from deducting donations of old socks to making unwanted investments. The waste of brainpower--at a time of increasing global competition--is incalculable.

The code corrupts our system of government by encouraging the crassest political conduct and by creating a massive, intrusive federal bureaucracy. One-sixth of the private-sector employees in Washington are employed by the lobbying industry. Half their efforts are directed at wangling changes in the tax code. Few people realize that our health-care system, with its runaway costs, is, in fact, the ultimate product of the tax-code distortion in our economy. And last, but most definitely not least, we simply pay too much in tax. When you take into account all the taxes, fees and tolls paid to the government, the typical American pays somewhere around half or more of his income in taxes. Why do we the people accept this?

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