to individuals’ wages and salaries beyond a large standard deduction. According to its proponents, the flat tax would achieve a myriad of desirable economic and public policy goals. Its backers say that because it would eliminate all deductions beyond a family exclusion—$33,300 for a family of four—the flat tax would be simple enough to file on a postcard sized return. They say it would be fair; it would tax everyone at the same rate and close loopholes that many middle income taxpayers suspect benefit only the well off. The flat tax is supposed to unleash a torrent of productive new investments, reduce long term interest rates, and boost living standards. The flat taxers claim that everyone will get a tax cut. (Consumer Reports 9)American business would flourish under a simpler tax code. Fast-growing, capital-intensive companies and new entrepreneurial startups, the kinds of businesses that create lots of good, well paying jobs, will be among the biggest winners. Because their capital spending needs are large relative to their revenue, they will benefit mightily from the freedom to expense their investments. They should be able to tap a deeper pool of equity from investors who will no longer be subject to capital gains tax. Says economist Gary Robbins, president of Fiscal Associates, an economic consulting firm in Washington: “Given a lower cost of capital, U.S. companies may discover that it’s profitable to manufacture flat-panel computer screens without a huge government subsidy or to ass market consumer electronics products they cannot compete in today.” (Dishman 44)The current tax treatment of corporate earnings discourages equity investment in general. Every dollar of earnings companies pay out as dividends today is taxed twice—once at the corporate level at a rate as high as 39.6 percent. The combined blow lifts the marginal tax on equity to a crushing 69 percent. (Dishman 44)Under the f...
