July 2007

The Flat Tax: A Positive Step Toward Limited Government

By John Hendrickson

In his landmark book, The Conscience of a Conservative, Barry Goldwater asks a fundamental question that is still relevant today for those of us who believe in constitutional limited government.

We all have heard much throughout our lifetimes, and seen little happen, on the subject of high taxes. Where is the politician who has not promised his constituents a fight to the death for lower taxes — and who has not proceeded to vote for the very spending projects that make tax cuts impossible?[1]

Proponents of limited government understand that achieving the goal is often hard, long, and frustrating. In addition it does not help if fellow conservatives give up or switch to “big government conservatism.”

In order to achieve limited government several guidelines must be embraced. Some of these include:

  • A strict following of the Constitution (Federalism),
  • Fiscal responsibility (a balanced budget),
  • Fewer regulations, and
  • Tax reform.

Economic liberty is the name of the game and the notion was understood quite well by the Founding Fathers. As Goldwater wrote, “The founding fathers had a reason for endorsing the principle of limited government; and this reason recommends defense of the constitutional scheme even to those who take their citizenship obligations lightly. The reason is simple, and it lies at the heart of the Conservative philosophy.”[2]

In order to establish and promote more economic liberty, the tax code needs to be replaced, not reformed. The best solution to achieve reform is to initiate a flat tax. A flat tax would tax income at a single rate.[3] The Steve Forbes flat tax plan, for example, would tax at a seventeen percent rate.[4] In addition the flat tax would “eliminate the tax code’s bias against capital formation by ending the double taxation of income that is saved and invested.”[5]

“This means no death tax, no capital gains tax, no double taxation of saving, and no double tax on dividends,” writes Daniel Mitchell of The Heritage Foundation.[6] Mitchell describes how a flat tax would:[7]

  • Simplify the tax code,
  • Restore fairness,
  • Reduce taxes,
  • End political favoritism,
  • Increase civil liberties,
  • Protect the middle class,
  • Produce faster economic growth,
  • Boost wealth, and
  • Increase our global competitiveness.

A number of nations are implementing the flat tax, including a number of eastern European nations, and the economic signs are good. As Steve Forbes writes: “In the U.S., the flat tax is perceived as a radical idea. But in countries around the world, it is known as a powerful tool that, in a short time, has helped turn around struggling economies and usher in growth and prosperity.”[8]

The flat tax would make the United States more globally competitive and also foster economic liberty and growth at home. As the global economy gets more competitive for American businesses and with the increase of outsourcing, the nation needs serious and substantial economic policy reform. The flat tax, in addition to cutting unnecessary regulations, is needed to keep our country competitive and give businesses an incentive to stay.

Herbert Hoover, Iowa’s favorite son, wrote: “Individualism has been the primary force of American civilization for three centuries. It is our sort of individualism that has supplied the motivation of America’s political, economic, and spiritual institutions in all these years.”[9]

American ingenuity, initiative, values, and the entrepreneurial spirit created by the Declaration of Independence and the Constitution have resulted in economic liberty. The flat tax will only create further opportunities and advantages for all Americans.

As Mitchell asserted: “There will never be a tax that is good for the economy, but the flat tax moves the system much closer to where it should be — raising the revenues that government demands, but in the least destructive and least intrusive way possible.”[10]

John R. Hendrickson is a Research Analyst at Public Interest Institute.

The views expressed herein are those of the author and not necessarily those of Public Interest Institute or Tax Education Foundation. They are brought to you in the interest of a better-informed citizenry.

[1] Barry Goldwater, The Conscience of a Conservative, Regnery, Washington, D.C., 1990, p. 52.

[2] Ibid., p. 10.

[3] Daniel J. Mitchell, “A Brief Guide to the Flat Tax,” Backgrounder no. 1866, The Heritage Foundation, Washington, D.C., July 7, 2005.

[4] Steve Forbes, The Flat Tax Revolution: Using a Postcard to Abolish the IRS,” Regnery, Washington, D.C., 2005, p. 60.

[5] Mitchell.

[6] Ibid.

[7] Daniel J. Mitchell, “Make Taxes Simple and Fair: Enact the Flat Tax,” in Jack Kemp and Ken Blackwell (eds.), The IRS V. The People: Time For Real Tax Reform, The Heritage Foundation, Washington, D.C., 1999, pp. 89-91.

[8] Forbes, p. 90.

[9] Herbert Hoover, American Individualism, Herbert Hoover Presidential Library Association, West Branch, Iowa, 1997, p. 29.

[10] Mitchell, “A Brief Guide to the Flat Tax.”