This decline parallels a similar drop in worker productivity growth, from 2.5 percent per year to only 0.9 percent. T he flat tax would reverse the slide in productivity growth and the corresponding low wage growth. It would do so by jettisoning the current code's bias against work, saving and investment.
C onsider how the present tax code treats saving and investment.
Today, we double tax business earnings, which places a strong bias against saving and investment. This double taxation of the same income reduces saving and investment and lowers living standards. Only by increasing their productivity can workers realize higher wages. In contrast to today's dizzyingly complex maze of depreciation schedules, expensing is simple, economically neutral, and pro-growth. It is neutral because expensing prevents double taxation, and pro-growth because more investment means higher productivity and higher take home pay.