A flat or single-rate income tax is grounded in widely accepted principles of taxation: simplicity, efficiency and fairness.

Simplicity. Simplicity means not only that the tax system is easy to understand, but also that the cost of complying with it is low.

Our current tax system is conceptually incomprehensible, even to tax professionals, and imposes large compliance costs on taxpayers. A government study estimated that Americans spend some five billion hours per year keeping records, filing forms and paying the tax.

Efficiency. All taxes impose a cost on the economy over and above the amount of revenue collected. Various economic studies have found that the cost of the U.S. tax system to the private sector is very high. For example:

• A 1985 study concluded that the cost of the U.S. tax system was between 15 percent and 50 percent of each additional dollar collected.

• A 1991 paper by Professors Dale Jorgenson and Kun-Young Yun put the cost of the tax system at 18 percent of revenue, implying that collecting taxes costs approximately $250 billion per year - almost $1,000 per person.

The flat tax eliminates distortions in the tax base and the tax bias against saving and investment. And without progressivity, taxpayers are no longer pushed into a higher tax bracket by inflation.

Fairness. In Washington, fairness has traditionally been defined as "the rich should pay more." This can be achieved simply by a flat rate under which someone with an income 10 times higher than another would pay 10 times more. But during World War II the top tax rate reached 94 percent, and as recently as 1981 it went as high as 70 percent. Today it is 39.6 percent.

Also, under our current system one's tax liability depends not just on the amount of income, but on its form (wages vs. business income) and the amount of tax deductions, exclusions, credits and exemptions.

Professor James Buchanan, a Nobel laureate, argues that the most "politically efficient" system of taxation "would involve a flat-rate, proportional tax on all sources of income, without deduction, exclusion or exemption."

Source:: Bruce Bartlett, "Benefits of the Flat Tax," NCPA Brief Analysis No. 194, February 8, 1996, National Center for Policy Analysis, 12770 Coit Rd., Suite 800, Dallas, TX 75251, (972) 386-6272.

ea mj 96l