Why a Flat Tax is Neither Flat nor Fair

Mark Finney
Journalism Department

In the last two weeks, two candidates for the Republican nomination for president have proposed to institute a flat tax in lieu of our current tax system.  Herman Cain’s 9-9-9 plan would impose a flat rate of 9 percent on just about everything and everyone and Governor Perry’s plan would impose a 20 percent flat tax, with the option of doing one’s taxes via the old system and taking the lesser tax burden.
Many have proposed flat taxes throughout the years and, thankfully they have always failed.  I write thankfully because a “flat” tax is actually regressive: It has a greater burden on the poorer among us, those whose needs are the greatest.
“But wait,” I’m sure you’re thinking, “a flat tax is flat – it burdens us each equally.” Alas, while it may appear that way, allow me to offer an example, using Cain’s 9 percent tax as a model:
-Person A makes $100 and person B makes $50.  Each is taxed the same amount, 9 percent, leaving A with $91 and person B with $45.5.
-Each lives in an apartment for $15, spends another $15 on food, drives a car that costs them $5, spends another $5 on clothes and eats at a restaurant for $2.  (15+15+5+5+2=42).
This, of course is a fictional example and, you might say “B can eat less expensively, live in a cheaper apartment, etc.” I get that, but at a certain point, one must buy food, live somewhere, etc.  One can only cut so many costs before becoming deprived.  And if you can accept that logic, than this example uncovers the inherent problem with a flat tax.  For A, who makes $100, there’s $58 left to spend, but B, who makes $50, is left with only $8 (or negative $15 if he has a girlfriend).
This fictional example exemplifies why a flat tax is a “regressive” tax system, one where the actual burden of the tax is greater on some people than it is on others in terms of real money – i.e., their actual spending money.  The burden, in this case is much greater for B, who has a lot less money to spend after taxes and expenses.
Many argue that the current tax system is flawed.  Heck, everyone believes this and they’re probably right. There are more loopholes, exemptions, or work-arounds than you can shake a stick at, which creates disparity and unfairness.  This is why Warren Buffet, the “legendary investor” complained recently that he pays less in taxes than his secretary (he doesn’t, but his tax rate, according to the statement, is less).
But the United States has had a progressive tax system since a federal income tax was enacted in the early 20th century and, as you can see from above, there’s a good reason for it.  A flat tax, though certainly simpler, flips our progressive system on its head, creating inequality and unfairly burdening those who can afford it least.