not produce successful tax reform. Next, the flat tax initially would raise taxes on the middle class by 20 percent. On average, a family with between $40,000 and $50,000 in adjusted gross income would see there taxes rise about $700 to about $7.500. The flat tax also appears to have a major fairness problem. For example consider two families. The Jones have a combined salary of $50,000 in wages. Under the flat tax, a 20 percent rate would cost this family $3,700. Now consider the Smiths, who in r etirement consume every dollar of their $1 million in dividend income. Under the flat tax, the Smiths owe no tax at all because capital income is excluded from the tax base. To be sure, their dividend income was taxed at least once at the business level before they received it. But the perception would persist that a high income family would pay no tax. Will tax fairness be defined so that individuals consuming significant amounts of capital income would pay little or no tax? Though difficult issues, they are not impossible to resolve. Moreover, the system's advantage could well outweigh it's drawbacks. The flat tax could prove a boon for the economy by eliminating a passel of convoluted tax disincentives to saving and inve sting. Economists will quibble over exact estimates, but there can be no question that savings and investment will improve in both the short and long run under a flat tax. Advocates are correct to insist that the flat tax would be much ...
