Redstate

Somebody talked Bob Dole into pushing a 15% flat tax at the convention, I seem to remember.  It was the most awkward thing...  I'm not convinced he could have won that election if he was Reagan and JFK combined on a steroids cocktail boost, but that 15% brainfart surely kicked the hell out of Dole's image as a serious candidate.  Horrible moment.

And yes, I did vote for Dole.  I seem to have this knack for picking losers...

It was a 15% across the board tax cut, not a flat tax. Then again, I'm clearly too lazy to google.

The Dole candidacy just needed a lot more of Dole's very personal, funny, and personable side - not the robotic angry old man rhetoric that his staff gave him.

Well, it was his turn.

A flat tax makes no sense -- either as a matter of economic fairness or as a matter of raising revenues.+

Social Security, on the other hand, is close to self-destruction.  The deficit is historically high (both in real terms and as a percentage of the GDP) and it is increasing -- and there are no credible numbers that suggest a reversal.  The Baby Boomers begin to retire en mass in ten years, which will result in reduced payroll tax receipts.  Fewer workers will be forced to fund more retirees -- which means that taxes will increase or benefits will be cut.++

A proposal to reform Social Security now, before the boomers retire, would be bold, unexpected, and truly in the national interest.  Say, a partial privatization plan that makes today's retirees tomorrow's shareholders -- making today's blue collar worker tomorrow's investor class, and turning "class warfare" on its head.  

It will be difficult to present (much less pull off), however.  It will require Bush to deal with some real complexity in a nuanced way -- something that Bush has indicated is not part of his campaign strategy.  In light of the voting power wielded by retirees, it is also exceedingly risky.  But, if we must dream, let us dream big (and of money).

von

(+)A flat tax rate -- even one with significant exemptions for low income individuals -- relies on the false presumption that each dollar has equal value.  But each dollar does not have the same value:  rather, your first 20,000 is more valuable than your next, your first 100,000 is more valuable than your next, and your first 1,000,000 is more valuable than your next.  (This is essentially a gross oversimplication of the concept of marginal utility.)  There are reasons to favor a flat tax rate, but taxpayer fairness -- the frequently-cited putative reason -- is not one of them.

(++)I'm aware that Bush's tax cuts (and a flat tax) would not target payroll taxes (which fund SS).  However, Washington has indicated its willingness to mix funds when it suits its political purposes, and I see no practical distinction in terms of taxpayer impact (save that a payroll tax is very close to a flat tax).

I agree that Social Security should be the one big idea.  It could also help in the future as it becomes an issue that educated youth understand is in their interest.  The CATO institute has a very simple solution: The 6.2% solution.  The main thrust is:

1)Individuals would be allowed to divert their half (6.2 percentage points) of the payroll tax to individually owned, privately invested accounts. Those who chose to do so would agree to forgo all future accrual of retirement benefits under the traditional Social Security system.

2)The remaining 6.2 percentage points of payroll taxes would be used to pay transition costs and to fund disability and survivors' benefits.

3)Workers who chose the individual account option would receive a "recognition bond" based on the accrued value of their lifetime to-date benefits. Those bonds, redeemable at the worker's retirement, would be fully tradable in secondary markets.

4)Those who wished to remain in the traditional Social Security system would be free to do so, accepting a level of benefits payable with the current level of revenue.

I think it's straight forward and plays well with the "Ownership Society" that I already think ought to be the Republican emphasis on economics for the few cycles.

++The Payroll tax is quite regressive, not flat.

According to former Treasury Secretary O'Neill's book (and a memo that supports what he says), Bush was presented with the facts around privatizing parts of Social Security.  He had to decide if he was willing to accept that there would be pain involved if he privatized SS.  He instead simply let the idea die on the vine rather than deal with its real ramifications.  Many posters at this site like to refer to SS as a Ponzi scheme, since today's SS receipts fund today's payouts to retirees, as opposed to actually being saved to pay for future generations, let me point out that the transition costs to move to a semi- or fully- privatized SS system would be enormous.  Further, I believe you do not understand human nature if you believe that voters will simply accept poor returns if they get them through their own failure to invest their SS money wisely.  Instead, there will be enormous pressure on our policiticians to make it all better and subsidize poor performing individual SS accounts.  Just think S&L bailout.  Not only is privatization an enormously costly idea, it is doomed to failure unless human nature changes dramatically, starting right now.

10% across the board spending cut for the federal government. Any person with 7 figure budgetary responsibility that does not submit a revised budget by 1/20/2005 is unemployed on 1/21.

Although I like the idea of SS reform/privatization, and although I think the old "third rail" is not quite so high voltage as it may have been once upon a time, I do think the overriding importance of Florida this year obviates the possibility of proposing anything too radical with regard to Social Security. I can't think of a better way to give John Kerry some scare tactic talking points in Florida that will drive up his numbers. I mean, there are a lot of old folks in the Sunshine State.

I agree that a true flat tax would be a hard sell. Although I like this idea a lot, I'm increasingly of the view that genuinely radical and comprehensive reform of the tax code will not occur within the context of an income tax. There are just too many groups and sectors with too big a stake in the current tax code to really simplify it (the real estate industry, the non-profit sector, and homeowners in general would all likely be bitter enemies of any plan to move to a flat tax; and keeping the tax code subsidies for these interests in place would severely undermine any plan that emerges).

No, I'm increasingly of the opinion that jettisoning income and payroll taxes altogether in favor of a national consumption tax would actually be more politically feasible than attempting to keep an income tax in place  that has gotten rid of all the goodies it currently doles out to this or that interest group. And as has been written extensively elsewhere, there are ways to keep such a tax from being regressive. My own guess is an honest, upfront proposal to do away with income and payroll taxes altogether would be hugely popular, and would put the Democrats on the defensive.

The Payroll tax is quite regressive, not flat.

According to the National Bureau of Economic Research, an organization with 12 of the 31 Nobel Prize Winners for Economics, "Social Security Does Not Redistribute Income".  A summary of their study can be found at the link below.

http://www.nber.org/digest/may00/w7520.html

"Many people think that Social Security is a progressive program which redistributes income from the rich to the poor. But according to new research by Julia Lynn Coronado, Don Fullerton, and Thomas Glass, Social Security does not redistribute from people who are rich over their lifetime to those who are poor. In fact, it may even be slightly regressive."

Although I admit the NBER study does show it is less regressive than I thought.

the social security system redistributes from

a) young to old

b) single to married (esp married w/only 1 worker)

c) working to non-working

d) healthy to disabled (disability insurance..)

e) men to women (women live longer..)

and I know I'm forgetting at least one or two other redistributive effects of the whole system

Social Security reform is a fine idea.  Yet, I think the idea we're looking for here is a simple one.  Something that is easily explained.  Reforming social security isn't easy, and it's also the third rail of politics.

Other than flat taxes (taxes on a postcard), I don't know how many issues are that simple.

He should propose that any company listed on an American stock exchange limit the pay and benefits (including stock options) given to CEOs and board members.

they are talking about what most humans would consider a rounding error.

the authors find that Social Security is actually slightly regressive, with an effective progression measure of 0.998.

This would be like limiting sports star salaries.

It osunds good, and really appeals to the downtrodden. But when you factor in international competition, we'd get eaten alive if we limited our CEOs.

Not to mention that the total number of companies listed on the AMEX is far less than those listed on the NYSE and the NASDAQ.  

A salary cap for CEO's?  Then CEO's would probably start coming together in whiny unions, and it would be impossible to fire them when they ran their companies into the ground.

   I think his one new thing should be major federal funding of research on the use of stem cells that do not come from the distruction of a fetus.

THE American Stock Exchange, I meant an American stock exchange, including the NYSE and NASDAQ.

Also, not a specific salary cap, but a limit based on the company's profits.

Are, to an extent, regressive.

Embryos which aren't quite fetuses and appear to be the source of all the consternation of this issue?

Once you earn over something like 80k, you don't have to pay SS tax anymore.  A flat tax wouldn't have a cap on it.

Well that's certainly more reasonable, though not necessarily a good idea.

1.  I think you mean this, but you pay SS on the first 80-or-so grand in income.  It's not that "[o]nce you earn over something like 80k, you don't have to pay SS tax anymore" on any income.    
   
2.  SS is a functionally flat tax.  I agree that it's a "flat tax" in the strictest sense.

If we were starting from scratch, I believe a consumption tax would be the best alternative for a variety of reasons.

However, the transition would be unfair for people who have struggled to build a retirement fund throughout their life, paying income taxes on first their wages, then on their investment earnings.  To come back now, just as they start to spend down their money, and say they have to pay an additional level of consumption taxes is not fair.

A low, flat tax with no deductions except a personal exemption would be my choice.  I agree that it is not politically feasible at this point.

Well, a low flat tax with no deductions except a personal exemption would possibly be my choice, too, save for my real doubts about its political feasability; hence my preference for abolishing payroll and income taxes altogether. Almost all the politically serious flat tax plans I've seen proposed include keeping some form of deduction for mortgage interest and charitable contributions. Aside from the undesirable distorting effects of such tax code subsidies, leaving them in place would allow the foundation for further such meddlesome tinkering to remain entact. In a few years we'd be back to the same old complicated mess we now live with (indeed, witness the growth of tax code complexity since the 1986 reform).

But when you think about it, even if it were feasible, moving to a flat income tax/no deductions scheme would also be unfair in its transitory phase to, for instance, mortgage payers who have figured in interest deduction into their plans...

I think it's widely agreed that our current tax code is unfair, inefficient, overly complicated and growth-impeding. I think it's also agreed that any transition is likely to be fraught with difficulties.

Why not babies who aren't quite children?

How about announcing a shake-up of government-funded health research to make finding a cure for cancer the nation's #1 health research goal, with a Kennedy-to-the-moon-like deadline for achieving it?  

This proposal would be one way of making the most of Bush's reputation (like it or not) as someone who identifies an objective and then pursues it relentlessly.  I think President and Mrs. Bush have demonstrated enough personal interest in the issue, too, that the proposal would not be perceived as insincere.  (Mrs. Bush's mother is a breast cancer survivor.)  I don't know the Bush Administration's record to date on the issue, however.  

This proposal would seem to satisfy the criteria of (a) reaching out to undecided voters, and (b) frustrating the Democrats.  Would it also (c) excite the base?  I'm not sure.  It might just sound like more government spending.  But if it could be pitched as a reordering of priorities instead of just additional government activity, maybe even the base could get excited about it.