On two recent topics: eliminating states/state taxes entirely, and whether flat taxes are progressive: 1) I have long felt that competition among states is destructive and stupid, and in general I support the notion of federalizing taxes. This would not be without some cost and risk, however. One cost would be losing those progressive experiments that some states sometimes undertake. I think that progressives are so used to the horror stories about the Texas Schoolbook Commission and California's current insanities that we forget that there are some good things done by states. Personally, however, I'm willing to give that up, since I think that the net impact of differential state taxation is overwhelmingly bad. There would also be genuine concern about loss of local control and a risk of local circumvention. At the most petty level, does elimination of state and local taxation mean that people can't have a bake sale for the local high school band? Probably not; but what if the upper-income neighborhoods start pushing the limits of that exception by, for example, selling T-shirts for $1000 each? Enforcement of this could be messier than we think; but, as I say, I'm willing to risk it. The bigger risk is what happens if the entire federal government is taken over by right-wing nuts? OK, this is not an "if" at all; and if Phil Gramm wins the next Presidential election, the takeover would be complete. At that point, if there are no states (effectively speaking, at least), there is nothing that can be done for at least two years. I'm much more worried about that risk. 2) Yes, flat taxes can be structured in such a way that they are more progressive than the current system. However, having a flat tax that tops out at 17% means that no one will EVER pay more than 17% in taxes (since the progressivity would be achieved by creating effective tax rates below and approaching 17%). Moreover, the current flat tax schemes would only tax income from labor, but they do not tax an individual's income from interest, dividends, etc. (on the grounds of the old red herring about "double taxation"); so they are even more loaded to favor the wealthy. Finally, there is no reason why you have to accept a flat rate in order to eliminate most of the wealthy-friendly loopholes. You can eliminate the loopholes AND have a progressive rate structure--which is exactly what Gephardt's plan does. (I'm not a shill for Gephardt; it's just that his plan happens to be pretty good.) For those who might argue that incremental improvements are all we can hope for, I fear that the incremental improvement from the current system to a more-effectively-progressive flat tax system is not worth it, since it would accept the logic of flatness; and re-introducing progressive rate structures would then be much more politically difficult. A judgment call, to be sure; but I strongly suspect that this would be the case. Neil H. Buchanan
