The Right Books

In 1962 Milton Friedman, in his book Capitalism and Freedom, made the case for the flat-rate income tax; for twenty years afterward not much was heard of the idea. Then, in December 1981, the Wall Street Journal published an article by two Stanford University professors, Robert E. Hall and Alvin Rabushka, proposing a flattax system, the forms for which would fit on a postal card. In their book Low Tax, Simple Tax, Flat Tax (McGraw-Hill, $9.95, paper), the pair recount the surprise with which they followed the interest generated by the piece; a spate of phone calls and letters to the paper; editorial endorsements by the New York Times, the Washington Post, and the Christian Science Monitor; articles in other dailies and financial papers; pieces by syndicated columnists; the introduction of nearly a dozen flat-tax bills by members of Congress; and finally, last July, a statement by David Stockman that President Reagan might propose flat-tax legislation in his 1984 budget message.

Hall and Rabushka’s plan, simply stated, calls for an across-the-board tax of 19 per cent—a uniform low rate at which all income would be taxed once, and only once, under the category either of business income or of wages and salaries. “Our simple flat tax,” the authors write, puts taxation onto a new philosophical basis. Today, the tax system puts tax rates of 50 to 70 per cent on the most successful members of our society, but at the same time it lets many of them wriggle out of paying these heavy taxes. In the process, it seriously distorts their economic behavior. A minority among the successful who give in to heavy taxation face badly diminished incentives for further success. Others pursue shelters instead of productive effort. As a comprehensive remedy, our simple flat tax puts the same low tax rate on everybody’s income above a standard personal allowance. At the outset, it collects somewhat less revenue from the successful and necessarily more from the average taxpayer. But as economic energies are redirected into productive activities in place of tax avoidance, the economy will grow more rapidly to a new higher level of income and well-being. By 1990, every income group will be unambiguously better off from the economic benefits of tax reform.

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In 1962 Milton Friedman, in his book Capitalism and Freedom, made the case for the flat-rate income tax; for twenty years afterward not much was heard of the idea. Then, in December 1981, the Wall Street Journal published an article by two Stanford University professors, Robert E. Hall and Alvin Rabushka, proposing a flattax system, the forms for which would fit on a postal card. In their book Low Tax, Simple Tax, Flat Tax (McGraw-Hill, $9.95, paper), the pair recount the surprise with which they followed the interest generated by the piece; a spate of phone calls and letters to the paper; editorial endorsements by the New York Times, the Washington Post, and the Christian Science Monitor; articles in other dailies and financial papers; pieces by syndicated columnists; the introduction of nearly a dozen flat-tax bills by members of Congress; and finally, last July, a statement by David Stockman that President Reagan might propose flat-tax legislation in his 1984 budget message.

Hall and Rabushka’s plan, simply stated, calls for an across-the-board tax of 19 per cent—a uniform low rate at which all income would be taxed once, and only once, under the category either of business income or of wages and salaries. “Our simple flat tax,” the authors write, puts taxation onto a new philosophical basis. Today, the tax system puts tax rates of 50 to 70 per cent on the most successful members of our society, but at the same time it lets many of them wriggle out of paying these heavy taxes. In the process, it seriously distorts their economic behavior. A minority among the successful who give in to heavy taxation face badly diminished incentives for further success. Others pursue shelters instead of productive effort. As a comprehensive remedy, our simple flat tax puts the same low tax rate on everybody’s income above a standard personal allowance. At the outset, it collects somewhat less revenue from the successful and necessarily more from the average taxpayer. But as economic energies are redirected into productive activities in place of tax avoidance, the economy will grow more rapidly to a new higher level of income and well-being. By 1990, every income group will be unambiguously better off from the economic benefits of tax reform.