ax would rebut with the fact that all capital income is already taxed at the business level.One of the most debated topics on the flat tax is whether or not it increases economic growth. Proponents of the flat tax claim that the flat tax would allow Americans to keep more of the money they earn, creating the desire to work more, and to save and invest more (Mitchell 1, 13). Even if a flat tax lifted long-term growth by as little as 0.5 percent (and most estimates show growth increasing by twice that amount, 1.6 percent), the income of the average family of four after ten years would be as much as five thousand dollars higher otherwise (Mitchell 1, 13; Gale 2, 2). According to one study by a former chief economist for the Congress’ Joint Committee on Taxation, under the flat tax the economy would 5.7 percent larger after five years than under the current system. That translates into $522 billion in higher output, or $3,000 in higher income for the typical family of four (Armey 4). But this effect may be overstated, because it rests upon a rapid increase in the saving rate, that is unlikely to occur (Gale 2, 2). Opponents of the flat tax have a simple argument; if every person in the U.S. had their taxes cut the federal revenues would fall thus increasing the deficit. The Treasury Department has estimated that a 17 percent flat rate as proposed by Rep. Dick Armey would increase the deficit by $160 billion a year. However, Armey and other conservatives have taken this fact into account and agree that at the current growth rate a 17 percent rate would not work, but with the increased saving and investment the economy will rise, thus with strict government controls on spending as proposed by Rep. Armey, the budget would work itself out (Mitchell 1, 39-40).A real important issue raised by the opponents of the flat tax is what the flat tax would do to the poor. Millions of low-income families living in poverty receiving a wage s...
