From: evenson@hitl.washington.edu (Mark Evenson)
Subject: Re: NBC News report on Jerry Brown
Organization: R+D Hipsters @ virtual HITLab, Ithaca
Date: Wed, 8 Apr 1992 09:25:15 GMT


This is kind of academic at this point (Brown just having finished third
behind a ``resurgent Tsongas'', but I think the NBC analysis was badly
flawed.

For those interested, you should check out "Why the Left should support the
flat tax" by Alexander Cockburn (columnist for _The Nation_) and Robert
Pollin (UC Riverside economics professor and on the national steering
committee of the Union for Radical Political Economics) in _The Wall Street
Journal_, April 2, 1992, A15.  But I'll give some general replies to Mr.
Crispin's critique of the Flat Tax.

o  the analysis NBC reported probably comes from the six-page study
released by the Citizen's for Tax Justice (CTJ)--a ``liberal watchdog
organization''.  CTJ utilized a 1984 study by the Readgen treasury on a
national sales tax, and badly misapplied its findings (assumptions made
under the Reagan Treasury about impact are carried over to Brown's proposal
which don't fit.)

o  the VAT would not be a ``national sales tax''.  It is a tax, common in
Europe, levied at each stage of the production process in which raw
material is converted via labour to another product (i.e. every time
``value'' is added).  Thus, distribution and retail and *not* stages at
which the VAT would be asessed.

o  the flat tax would replace *all* corporate taxes.  Nothing else would
exist to reduce profit (well, almost nothing, but no federally levied
taxation).   As such, the statement that the VAT would add to prices, makes
as much sense (nay is equivilent to), saying that *any* corporate tax would
add to prices.

o  Social Security is currently maintained by highly regressive payroll
taxes, so the flat tax proposal wouldn't make the Social Security tax
system any *more* regressive.  In fact there are arguments (due to the
simplicity of the flat tax there are no real loopholes no matter how many
ex-H&R Block suits you employ, among others) that suggest that it is
considerably less regressive.

o  with universal health coverage (something that *must* be part of a flat
tax, admittedly), a great deal of of the expense for lower income taxpayers
is not a factor.  This avoids the morally abhorent of offering a tax credit
for medical insurance that one cannot pay for in the first place.

o  the only allowable exemptions would be for mortage interest, rent and
charitable contributions, with something like a $15,000 limit.  This would
take care of housing costs, but not allow tax shelters via huge mortages.

o  federal taxes on cigarettes and alcohol remain.  If ``the VAT will hit
[``the poor''] on every single purchase they make'' as Mr. Crispin
suggests, it will be here.    But these are ``vice taxes'', perhaps more
legitimate now that society has contracted a universal committment for
health care (I'm a heavy smoker, and a moderate drinker, but accept that these
activities put a non-productive burden on society).  Federal taxes
on gas are gone.  Food stamps remain to those eligible.  


There's more to Cockburn and Pollin's essay--if I had the time I would type
it in and post it, but it's late.

At first, I thought the flat tax was totally stupid.  But then I looked
into it as the only seriously thought-out proposal of the election (barring
perhaps Tsongas').  And it grew on me,

Brown was attempting to put an end to the $393 billion lost this year in
the current tax code with its ``labryinth of exemptions, exclusions, and
credits''.  That's a lot of dough, man, and to try to fix the tax code is
totally right on.

Again, Brown is basically out of the race, but the flat tax was a genius
stroke.  It offers serious reform, but not the radical restructuring that
some figure like Perot threaten.  Too bad Brown wasn't able to come up with
more challenging proposals like this (and maybe the media just couldn't
handle the non-rhetorical approach to this one).  If the ``protest vote''
and anti-incumbant mood locks in behind Perot, ol' Moonbeam might just look
heavenly. . .