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Fuzzy Math = Hairy Tax System

Jeff Cohen

In his article “A Better Way to Tax” (The Tech, Feb. 21) Justin Wong advocates a tax plan that would spell disaster for the United States. Mr. Wong suggests eliminating all current Federal taxes and replacing them with a single national sales tax. The main problem with this plan is that such a tax would be regressive — the poor would pay a higher percentage of their income than the rich. Several of the benefits Mr. Wong describes also simply would not occur if such a tax were implemented.

Presently, the rich pay a higher percentage of their income in taxes than the poor. This has been necessary to support a Federal budget of the size that we currently have without placing an insurmountable burden on the most disadvantaged Americans. While some people make an incentive-based argument in favor of a flat tax (e.g. one where everyone pays the same fraction of his or her income), surely we can agree that a regressive tax (one where the poor pay a higher percentage of their income) is a bad idea.

But Mr. Wong’s “fair tax” would create just such a tax. The poor spend a higher percentage of their income on consumption, so they would pay a higher percentage of their income in taxes, as well. Mr. Wong asserts that the current progressive tax structure is actually responsible for the rich-poor gap by penalizing people for earning more, and his regressive tax would fix that problem. I don’t know where to begin responding to that argument other than to say that it’s patently ridiculous. The poor have an incentive for upward mobility as it is: making more money would help them stop being poor! We don’t need to hit them with an extra-heavy tax burden to make that even more true.

A number of Mr. Wong’s other claims are false, as well. He says that as taxes levied at each stage of production and transportation are removed in favor of a sales tax, prices of goods will fall. This cannot be the case. If the sales tax is to keep the Federal budget at its current level, it must be equal the sum of all current taxes. That includes the ones levied during production and transportation of goods to their final consumers, income taxes, corporate taxes, capital gains taxes, estate taxes, and all other taxes. When I buy a loaf of bread, the price I currently pay is pushed up by some taxes. If this sales tax is to make up for those and my income taxes, too, it must be greater in magnitude than just the taxes I pay for the bread today.

Mr. Wong also claims that the sales tax will save us all on the amount of tax we pay. Unless he’s trying to sneak through a massive budget cut, that can’t be true: if everyone is saving on taxes under Mr. Wong’s system, tax revenue must be lower!

These, and other flat tax plans, are based on fuzzy math and incorrect assumptions that would leave us bankrupt and devastate poor members of our society.

Jeff Cohen is a member of the class of 2006.