by Tony Palmentera

Created on: February 22, 2009

The question posed is overly simplistic, and allows for only two options. The answer is yes, to both taxes, and yet no to both. There are several reasons to switch to a flat tax, most of which is equality in taxation. Sales tax, as opposed to existing income tax, incentivizes saving, investment, and production. The main problem with simply moving to a flat tax is that the equal tax rate includes most of the same inefficiencies as the current progressive income tax, in terms of Dead Weight Loss (DWL) and causing a need for wealth redistribution by taxing the lower middle income citizenry into poverty. The problems with the sales tax are DWL, and transfer of DWL from incentives to consume to disincentives to consume. The oversimplistic question of what to do with out current tax system is answerable, however. It includes property tax.

There is only one tax in the history of humanity that carries with it no DWL distortions on surplus or demand; property tax. If free market economics is the presumed standpoint, then eliminating interferences, distortions, and perversions of the markets should be JOB ONE. I suggest a FLAT property tax. Flat tax has the advantage of fairness, but when placed on income it creates DWL distortions. If placed on property it has no such problem. Also, the problem of taxing the lower middle class into poverty decreases due to the low percentage of homeownership among the $45K-$70K annual income bracket (devoid of foolish government programs that may interfere in the housing market, of course). In doing so, the need for wealth redistribution reduces, and pressure on government welfare budgets lessen. This results in lower taxation on the property owning tax base, which is overwhelmingly made up of corporations. Corporations own a high percentage of American property, and a huge concentration of the most valued. This tax, therefore, is carried on the back of corporations more than American homeowners. This still would be a moderate tax rate, because it isn't the only tax in the system I advise adopting. The flat property tax is simply a base for a tax system built on limited interference in the market and the highest achievable equality in both oppurtunity and result.

The second tax I suggest is a REGRESSIVE income tax. With a flat property tax as a base, tax evasion and deficit spending become nearly impossible by nature. Taxation of every individual costs us an estimated $200 billion dollars a year, as referenced from research done on the

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