James Pethokoukis at NRO agrees with me on the need to simplify the tax code without necessarily flattening it:
It’s an elegant, compelling model that might work splendidly if you were creating a tax code ex nihilo. Flat-tax fever swept across Eastern and Central Europe after the end of the Cold War, when finally independent nations were rebuilding their own economies, and the model has been quite successful, for the most part.
America, however, is in a much different place. Millions of individuals and businesses have made long-term plans based on expectations that the tax code will remain more or less the same. Half the nation, thanks to all those deductions and credits, pays no income tax. And, perhaps most important, an aging population means that the cost of health-care entitlements will grow rapidly, even if health-care inflation slows.
Adding that flat taxes are consistently unpopular with voters, Pethokoukis thinks through some other options:
One solution is to take the essentially flat consumption tax devised by economists Robert Hall and Alvin Rabushka and give it a progressive rate structure. Or we could combine a consumption tax with a flat income tax on wealthier Americans, as suggested by Yale’s Michael Graetz. Both ideas are also flexible enough give needed tax relief to parents. (Call it a “human-capital gains” tax cut.)
The flat tax embodies pro-growth, supply-side principles that are great starting points for tax reform, but it shouldn’t be the destination.
The Dish 