A Flat Tax is a Moral Tax

Most people agree that if you own a plot of land, you are entitled to the goods it produces, and a 1/1000th share of ownership in a corporation entitles you to 1/1000th of its revenue. Similarly, when the state taxes at a certain percentage, it claims partial ownership of the citizen in proportion to the amount taxed. In a scheme of progressive taxation, the state claims a greater share of some people’s life than others.

Taxation is more than just a material loss. Taxation is the state taking away our most precious commodity, time, with the threat of a prison sentence. If you work 40 hours a week and are taxed at 15%, the state has appropriated six hours of your week, time you could have spent with your family or pursuing your passions. While the six hours lost to the government is not forced labor, it is not far off. The only difference is that taxpayers can choose how they work. For that period, the state coerces the taxpayer into working to its ends. In the eyes of the state they are not a free person but a commodity. They become a means to an objective.

People who work or earn more sacrifice a larger share of their lives to the state and as a result face unfair bias. Person A who works 50 hours and is taxed at a rate of 25% loses 12.5 hours to the state while person B works 30 hours and is taxed at 15%, losing 4.5 hours to the state. This uneven burden is not moral or just. Most people would say that it is not okay for the government to force Person B into eight hours of extra labor to make up the difference. Even if they worked the same amount of hours, progressive taxation would discriminate against one of them because of their income. As Robert Nozick puts it, Person A may like to go to the cinema and requires extra income to do so while Person B prefers to look at the sunset. It is not characteristic of a free society for the state to coerce Person A more than Person B solely because their goals require more material means.

Discussions surrounding morality and taxation raise questions at the very root of government legitimacy. If our government derives its powers from our consent and individuals cannot offer rights or privileges to the government that they do not possess, does anyone have the right to offer up a greater chunk of their neighbor’s life than their own?

Progressive taxation violates a basic right to equality under the law. Individual rights are sacrosanct independent of how much money someone has in the bank. Once we have decided to justify infringements on natural rights under the pretense of a collective good, there is nothing left to prevent more heinous atrocities other than social norms. Norms that can deteriorate rapidly in times of distress.

A flat tax would take the same percentage of everyone’s taxable income. There are no brackets. If correctly designed, a flat tax is fair and not harmful to the poor. Under this system, income up to the poverty line is not taxed. For example, the federal poverty line for a family of four is $24,300. With a well designed flat tax, a family of four will not pay taxes on the first $24,000 they earn. A tax rate of 15-20% would lower the effective tax rate for low-income families.

This scheme acknowledges that the state has no right to take from the essential necessities of a family or individual. Aside from basic needs, each citizen gives an equal proportion of his working life to the state.

On the practical, as opposed to principled, side of the argument, a flat tax would also help erode the tax privileges of the ultra-rich and large corporations. The 400 highest-earning taxpayers in America paid less than 17% of their income in taxes. The top 1%, excluding the ultra-wealthy, would see a very modest reduction in their current average effective tax rate of 24%. A flat tax would close all loopholes and exemptions, except for the basic needs deduction, making it more difficult for legislators to create laws that give privileges to the ultra-wealthy at the expense of everyone else. The simplification of the tax code would make it more accessible and by virtue of its accessibility, more democratic and transparent.

Groups with political clout and large resources also use the tax code as a weapon. The IRS’s targeting of conservative groups in 2013 is only the latest scandal. During the George W. Bush administration, the NAACP claimed that the government used increased tax scrutiny to stifle criticisms of the President. Nixon’s Bill of Impeachment charged him with using the IRS to target political enemies. A flat tax would help fix this problem.

Additionally, a substantial amount of resources in our economy are tied up in complying with tax regulations. A 2008 report by the IRS stated that U.S. taxpayers and businesses spend about 7.6 billion hours per year dealing with filing requirements. That is the equivalent of 3.8 million individuals working 50 weeks a year at 40 hours per week. The cost of complying with personal and corporate taxes amounts to 193 billion dollars or 14% of total tax revenues.

The state has no right to claim greater ownership in certain citizens than others, but a progressive tax does just this when it unevenly claims people’s time. A flat tax with a basic needs deduction would make taxation fair without drastically shifting the burden to the lower and middle classes. Simplifying the tax code would prevent the privileged from exploiting loopholes and lobbying for privileges. It would also remove the enormous amount of opportunity and time tied up in the filing of personal and corporate taxes, freeing up a significant amount of resources in our economy and lives.
Featured image courtesy of the AP/Al Behrman.


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8 comments

  1. 8
    - says:

    Before this wall of text, I’d like to point out that I thought this was well written, and that my criticism isn’t meant to be mean-spirited.

    The first part of your argument is that someone’s effective tax rate is equivalent to time owed to the government, and as such it cannot be moral to have inequality in such an important part of life. While this serves as a nice literary device, I don’t think it holds up logically. In fact, you almost instantly violate this basic premise by proposing that we do not tax income below the federal poverty line. I completely agree that this would be a necessary part of any flat tax system, however this proposal leads to the exact same “inequality” that you want to shun. It will inevitably lead to people paying different effective tax rates, as nobody will be taxed on the same percentage of their income.

    To make the math easier, assume the poverty line is $20,000 and a proposed flat tax of 20%. If you make 20k a year, your effective tax rate will be 0%, if you make 40k it will be 10%, if you make 100k, it will be 16%. For reference, the current effective tax rates in the US for these income levels are 20k: 11.71%, 40k:13.6%, 100k:19.32%. Is the current progressive tax not then a “more moral” system under your model? These numbers fall into a much smaller range, and as such the immorality of different effective tax rates is reduced. In addition, around 80% of people make under 100k a year, and while your system mainly serves to even out tax rates of people on the high end of the spectrum, the progressive tax rate evens out tax rates of people lower down. As such, if you truly wished to find the “most moral” tax system, you would have to concede to taxing people below the poverty line at the exact same rate as billionaires, which I think you are aware would be a terrible idea. Once you concede to having more than a single tax bracket, you are just haggling numbers.

    Of course, I reject the entire premise that a government cannot be legitimate if each citizen does not give an equal share of their life to the government. This is entirely expected and not at all surprising. In fact, even under a true flat tax you would still have this inequality once you factor in what the government spends this money on. Programs for the poor can now be looked at as “unfair”, as the poor are now able to indirectly “recoup” some of their losses through government-funded programs, reducing their effective “time owed” to the government, not to mention the fact that there will never be a federally funded project that happens to benefit every single person equally.

    As a side note, I’m still not sure how you would deal with capital gains taxes, as the money that you earn off of investments is not very indicative of time spent working on them. If you stick 10 million dollars in an index fund and watch it grow at 4% a year, how should we tax that 400k+ that you are making? You certainly didn’t spend much time producing that income.

    So clearly, I disagree with the principled part of your argument, but I also disagree with the practical side. You mention that the top 400 earners pay less than 17 percent, and that top 1% pay around 24 percent. From context, I would assume that you are advocating a 20 percent flat tax, in which case you are essentially splitting the difference, and having each pay 20%. However, I don’t see how this is helpful. Do we really want to “reform” our tax code, only to give a tax break to the 1% — lowering their effective tax rates even further below what they already manage to achieve? This seems to serve the vast majority of the ultra-wealthy very well (as now they don’t even have to put effort into making their effective tax rate unreasonably low), while mildly inconveniencing the few hundred richest people in the country. I don’t think the ultra rich could hope to lobby for a tax code that served them much better than this.

    You also mention that the IRS can be used as a weapon by those in power, which I agree is a problem. However, a flat tax would do absolutely nothing to solve this. The 2013 scandal involved conservative groups seeking tax-exempt status, which groups would still have to do under a flat tax system. As for the NAACP, “increased tax scrutiny” is not eliminated by a flat tax — you will still need to report your income correctly to the IRS, and so they will still be able to “decide” to audit you for nefarious reasons. The same applies to the accusations that were made of Nixon – he was using audits as a political tool, which is still very possible with a flat tax.

    Your final point, I will concede. Yes, a flat tax would make it much easier to fill out taxes, and it would be great if they were simpler to do. However, I don’t think a flat tax is the only way of streamlining the tax system, and I don’t think that you’ve sufficiently shown that achieving this goal of easy taxes outweighs the economic impact that such a drastic change would have.

    While a flat tax does sound nice, I don’t think it holds up to scrutiny.

    1. 0
      Navid Kiassat ( User Karma: 21 ) says:

      First off, thank you so much for reading my article and taking the time to comment. I truly appreciate the criticisms.

      As far as taxes equivalent to time. I don’t think it can be dismissed that easily. It is a very real part of someone’s life and effects them greatly. Also, I do not think my exemption below the federal poverty line is inconsistent. There is a very small subset of government functions that can justify coerced appropriation of property. I do not believe most of what are government spends on does. The lack of tax below the federal poverty line for everyone acknowledges that the state has no right taking from the basic needs of a citizen. After basic needs have been provided, citizens should contribute equal amounts of their time. That is not philosophically inconsistent in any way.

      Of course government programs will always benefit people unequally, this is not just the case with entitlements. Some persons use roads more than others. The point is that the time government appropriates must be equal to be legitimate. What the government does after the appropriation is not of concern. In fact, much entitlement spending and social programs can be justified under libertarian philosophy because we acknowledge reparations and just property acquisition. Property acquisition has not been just historically, so some reparations are to the community at large are fair. Regardless of the value someone derives from government, the point is that they must contribute equally in their time. Also, the case could be made the rich derive more from the contract enforcement and policing function of the state. So in a sense, it evens out.

      While investments are not indicative of time spent working, the money invested at some point was made from some kind of work no matter how far down the historical timeline. Also, you have the issue of risk when it comes to investment of capital gains. Is it really just to make someone reap only 60% of the profits but 100% of the losses? And where does the state derive its right to tax that money?

      The rate need not be 20%. Flat-taxers have advocated up to 25%. That being said, government revenues would probably be slightly lower. Unless we had some economic growth to raise total revenues. But the lifting of the burden of the lower and lower-middle class will do well for the economy since they put in much of what they get out.

      The general premise of the IRS as a political tool argument was that the complexity of the tax code not only aids frivolous prosecution but aids in the distribution of political favors. A flat tax with no exemptions would prevent this.

      Also, 7.6 billion hours into the economy is nothing to scoff at. I suspect putting that capital to more useful work would raise government revenues significantly without much economic growth.

      1. 3
        Meiri Anto ( User Karma: 7 ) says:

        “Is it really just to make someone reap only 60% of the profits but 100% of the losses?”

        You are allowed to claim up to $3000 of capital gains losses in a given year as a tax deduction. In fact, one could argue that this effectively subsidizes risk taking since you have less risky investments (you get to save taxes on a portion of your investment losses), and many people use this deduction as a tax shelter. Look up the practice of “tax-loss harvesting”.

      2. 1
        - says:

        I think you have abandoned the main point of your article. When I took issue with the idea of your support of not taxing income below the federal poverty line, it was not because I thought that this idea was inherently contradictory. Rather, it was because this system *mathematically* causes more inequality and thus more immorality under your schema for analysis. Raising this percentage would in fact just make this worse.

        Even if I accept the central tenet of your argument (for the record, I don’t), that it is fundamentally unjust for people to have their time be appropriated at different rates, your article is still demonstrably false within your own framework. I still haven’t seen an actual rebuttal to this point.

        As for the rest of the points, very quickly:

        You seem to be advocating for very low (or even zero) capital gains tax. This only serves to help the rich, as only the rich can afford to put away large sums of money into investments. This would just become another tool for the rich to lower their effective tax rate. If you’re advocating for capital gains to be taxed at the same flat tax rate, then I could agree more with that.

        As for the IRS, I would like to again make the point that I don’t think that wealthy people could hope to lobby for a tax code that benefits them more than this. I agree – why try to leverage the tax code when you already have exactly what you want?

        As for the hours spent doing taxes, I would first like to point out that most people don’t do their taxes while at work (citation hopefully not needed), and would probably not use the time they saved by not doing taxes to work more. In fact, you could even argue that this complication creates jobs, as tens of thousands of accountants help people do their taxes every year. Saying that we lose 7.6 billion hours of working time is disingenuous.

        1. 0
          Navid Kiassat says:

          It is only *mathematically* inconsistent if you look it over the spectrum of total income. If you look at it after the poverty line, people’s time will be appropriated evenly. The philosophical justification for the exemption is the fact that the state has no business taking from the basic needs of a citizen. Once that philosophical point is established, the state takes even amount of time from everyone after that point.

  2. 4
    Ian G '18 says:

    This bourgeois production is fundamentally wrongheaded on multiple levels. First, you assume that the federal poverty line is a survivable income, which is fundamentally not the case. Having experienced life at or near this income level, I can state with confidence that even in a suburban environment, with a low cost of living, rent for a one-bedroom apartment averages $1000 per month, which is far more than anyone earning $24,000/year can pay for (assuming food for 4, which based on personal experience I put at $400 per month for the absolute bare minimum of nutrition, gas for a single car in the ballpark of $400 per month assuming a daily commute of 60 miles one-way at 20 miles per gallon and gas at $3.25/gallon, plus another $50 or so per month for laundry, and a few dozen more for utilities). Even with the cutoff that you suggest, your policy is considerably biased against the proletarian class while making the already stupidly-rich bourgeois class even more wealthy than they already are.

    Even more importantly, your policy fundamentally does not pay for itself. The government /needs/ money to function, and you are essentially describing a complete gutting of the government’s income. How are you going to keep the budget in a stable range? Gut the military? The Department of Defense might thank you for some budget cuts, but not on the level that would be necessary if you’re talking about slashing taxes on the top and middle income brackets like this. Gut social services? Sure, if you want to embrace capitalist bigotry with both hands and screw over the proletarian class.

    Third, you have a mistaken impression of how the bourgeois class makes money. The bourgeoisie controls the means of production in our society, and therefore are satisfied to sit on their money (keeping it out of the consumption cycle) and make their primary vessel of income the stock market and investment in general. What we should be doing is leveling society in a socialist fashion, increasing the capital-gains tax to focus on the bourgeoisie’s main source of income rather than the salaries and wages that are the proletarian class’s source of income.

    Class conflict is a natural consequence of the capitalist society as a whole, but by weakening the dominant socioeconomic class, we will be able to reduce the severity of class conflict and make our nation more free and equal while reducing the power of the bourgeois imperialists that currently use the state as their political arm. The solution proposed here, however, is fundamentally discriminatory, unethical, and immoral, disproportionately affecting the middle-class and proletarian class, while allowing the wealthy bourgeoisie to continue their oppression of the working class and imperialist invasions of resource-rich countries.

    A flat tax is not a moral tax. It is an instrument of oppression that flies in the face of socioeconomic realities and ignores the proportionally higher cost of basic needs to the proletarian class.

  3. 0
    Ben Goodman '17 says:

    “Most people agree that if you own a plot of land, you are entitled to the goods it produces”

    Many people agree no such thing.

    Over the weekend, I was reading some discussion on Tumblr initiated by a libertarian posting a passionate defense of capital income and using markets to make production decisions. At one point in the thread, she admitted that although private land ownership is justified because it allows more efficient wealth production, there is no real justification to allow land owners to get all the benefits of land commodification, and thus there should be a land value tax so that the people (the rightful owners of land) can capture the value contributed by it.

    “While the six hours lost to the government is not forced labor, it is not far off. The only difference is that taxpayers can choose how they work.”

    The old “taxation is slavery, aside from lacking most of the distinguishing features of slavery” argument. I appreciate thoughtful rightist contributions to campus discourse, but please try to be original.

    1. 0
      Navid Kiassat ( User Karma: 21 ) says:

      I included that little line because a justification for private property requires its own separate article and more. I understand that many people don’t believe it, it was more of a “assume the premise for the sake of the argument” kind of thing because I could not reasonably hope to include the topic in a 600-800 word op-ed.

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