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2010: should we consider flat tax?
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Should We Consider a Flat Tax?

Tim Sunderman
In a democratic society, we abhor inequality on principle alone. We suggest that all are equal under the law. One person, one vote. Why should our economic model be any different, any less democratic? We are all given equal access to our public services, and so the question is raised — why should some people have to pay more in taxes for equal access to what is publicly provided?
The first inclination is to suggest that everyone should pay the same amount for the same access. This is the flattest tax one can propose. However, it does not take long to realize that dividing out the Federal tax budget by the number of taxpayers would result in taxing a large portion of the lowest earning population more than their income.
And so, the equality of tax argument quickly accedes that a flat tax would not refer to a specific dollar amount, but would refer to a specific percentage of income. This is the heart of the flat tax argument. Everyone contributes thirty percent of their income, and in this way the equality of taxation is accomplished.
But the clear problem with a flat tax, though it sounds reasonable on its surface, is that lower income households need to apportion nearly all of their income to necessities like housing, food, utilities, and transportation. Whereas high income households have money beyond their essential needs. And it is this extra income, or discretionary money, that is targeted for a higher tax percentage because it can be more easily afforded. That is what is referred to as a progressive tax.
Some argue that a progressive tax is unfair. If some people don't have enough money after taxes to pay for their own needs, that should not be the problem of those who do have enough money — or at least, that is the line of reasoning that uses the guise of equality under the law as its rationale. But the place where that rationale falls short is that there would need to also be an equality of access to economic opportunity, which, because of the circumstance of life itself, is impossible.
It is this very principle of equality that forms our judgements for fairness. So it is useful to take a closer look at the social order that governs the wealth and opportunities that create our economy.
By far, the greatest opportunity to become wealthy is to be born into a wealthy family. The second best likelihood is through associations with other wealthy people whose circles are less likely to include poorer people. For those of lower economic status to rise, their best opportunity is through education.
Unfortunately, our public education also is very unequally provided. Less money is spent per student in economically depressed districts than in wealthy neighborhoods where local districts can and often do approve special taxes to improve their local schools. Compounding the problem is that children from families that have never attended college are far less likely to go to college than children of families that have.
This ultimately has the effect of entrenching classes in unmoving stations. And though we are a step up from the feudal lordships of the dark ages in terms of opportunity, it is distressing to see over the past thirty years the decimation of the middle class and an enormous surge in the numbers of the lower class while at the same time an unprecedented concentration of wealth in the hands of fewer and fewer people.
The most glaring characteristic of our economy is the disparity of the distribution of wealth. The richest one percent of the population owns more than the bottom 95%. The poorest 60% of the population owns less than 2% of the wealth. These statistics are from the U.S. Department of Labor.
This is what capitalism does — concentrate wealth in fewer and fewer hands. It acts like a large gravitational body. Whichever body is the largest within an orbit will ultimately absorb all the mass in its path. There is no other mechanism that drives capitalism. There are no market forces inherent in the system to avoid the concentration of wealth.
And so we devise laws and regulations to prevent monopolies and other destructive market tendencies. In retrospect of the past year, it is patently obvious what the results of allowing the market to regulate itself will do. In fact, the consequent bail out of the banking system, the largest redistribution of wealth in the history of humanity, only served to concentrate more wealth at the top of the population.
It is laughable that some gullible people rail against socialism when precisely the opposite dynamic is in effect — the acceleration of the process of concentrating wealth to the top. The economic collapse of the past year has demonstrated without doubt that we need to enact measures to stabilize the sustainability of the economy. Aggregating such huge amounts of cash into so few institutions so that they become too big to fail rewards incompetence and greed on a scale that threatens the common good.
It is hard to imagine how much worse things would become if a flat tax were instituted. A progressive tax rate has one of the most benign effects on the economy as a whole while accessing the real wealth in the system. It is the society at large that has created the wealth for the richest people, and that society should rightfully share in the wealth that it has created. That is a simple  way to create a small degree of stability in the system.
But ultimately the balance of the distribution of wealth needs to be confronted if we are to have a self-sustaining market. Taxation alone does not deal with the root of the problem. As a democracy we can vote laws into place that require workers to be paid in some rough proportion to the profit that they themselves have created.
In other words, if the bottom sixty percent of the population provides sixty percent of the work that creates the profit for their employer, then they should rightfully share in at least thirty percent of the wealth in the economy rather than the less than two percent that they are currently afforded.
Laws can be enacted to address inequality and fairness in exactly the same way as our current laws regarding minimum wage. But, until then, it is important to see the rationale behind the calls for a flat tax for what it really is — a policy to accelerate the concentration of wealth.
This article can be found on p26 in Issue 1 of Vhcle magazine.
Tim Sunderman is a Graphic Designer in the San Francisco Bay Area whose first love is drawing and painting, tries to avoid computers until there is no other recourse, and because there is no other recourse, yearns for the open spaces. Tim is a graduate from the Academy of Art in San Francisco, and majored in Philosophy at the University of Pittsburgh. He is a college art and design instructor and freelance artist.