The Problem With Ben Carson’s Tax Plan
Ben Carson has just announced a flat-rate tax plan, which means that all income would be simply taxed at 14.9%, and there would be no deductions or credits. This would eliminate the need for the IRS because it would, in theory, be “so simple the American Public can do it” (hooray!). There are three problems that immediately come to mind, though, with this tax plan.
1 — While the flat tax rate’s main selling point is its purported fairness, it disproportionally stresses low-income families. Families in the lowest income levels use a significantly higher percentage of their income for necessities than high-income families. Thus, the 14.9% taken for tax would encroach more quickly and significantly on the money they need for housing, utilities, food, and health care. This is part of why we have at least a partially progressive tax plan. The income of the wealthy more quickly and readily outpaces their necessities, so a flat-tax would be taking from their gravy, but from low-income families’ meat. (Source: Bureau of Labor Statistics, Consumer Expenditures Survey 2014)
2— Tax deductions don’t just benefit the rich, though Carson seems to think they do. Yes, there are the famed ‘loopholes’ that unfairly save the super-rich billions each year (and which should be closed), but there are also important tax credits based on family status, health, and exceptional circumstance. These deductions can become complex, but we have put up with the complexity for a reason: they are needed to protect the livelihood of families and individuals under particular financial strain.
3 — Tax deductions incentivize spending on things that are a public good. Think of all the charitable giving that happens late in the year — that isn’t because corporations are feeling the Christmas spirit; it’s because they get tremendous tax deductions for doing so. Think about the old building in your city center that was beautifully restored as the upper floors were converted into office space. That generally isn’t the most cost-effective process, unless they are given tax benefits for preserving the historical character (I’m aware that’s a local example, but the principle is the same). Those things don’t happen on a flat-tax, no-deduction system. Think of it as the government paying someone for doing something the government hadn’t gotten around to doing yet. It is interesting that Carson doesn’t address this, since he (and the conservative American generally) wants smaller government and more things in the hands of the private sector. A flat-tax would take work for the public good out of private hands, because it would remove the financial advantages that tax deductions provide.
It would be nice to make it simple. It would be nice to have taxes paid at paycheck time, and never worry about them again. It would be nice to not have to keep expense records, W-2’s, W-4’s, and 1099’s. It would be great to summarily end shady tax exploitation. However, as with most things, there seems to be no simple answer. One can appreciate Ben Carson’s attempt to simplify and streamline the system, but the flat-tax plan fails because it disproportionately stresses low-income families, removes tax deductions that benefit all income levels, and removes incentives to invest in the public good. As politicians are wont to do, Carson is looking to grab favor by appealing to a first-blush evaluation: “Equal! Fair! Simple!” As we look deeper, though, we see that it is not that easy.