I am convinced that a flat-rate income tax along the lines of the Hall-Rabushka plan is the best one ever devised.

Robert Hall and Alvin Rabushka are, respectively, an economist and a political scientist with Stanford University’s Hoover Institution. Their flat-tax plan dates back 25 years, showing how taxes could be filed on a postcard.

The key to their system is sweeping away every deduction, exclusion, credit and exemption in the tax code with the exception of a large personal exemption of at least $5,000 per person. Businesses would not be able to deduct anything except cash wages to employees and purchases of materials or equipment from other businesses. Businesses and individuals would pay the same single tax rate.

While simple conceptually, this plan would require elimination of deductions for state and local taxes, mortgage interest and charitable contributions. Businesses also would lose the deduction for interest and no longer would be able to exclude payments for employee fringe benefits, such as health insurance, from their taxable income.

On the plus side, interest income no longer would be taxable either to businesses or individuals, nor would dividends, rent or capital gains. Hall and Rabushka concluded that a 19-percent rate on businesses and individuals alike would equal existing corporate and individual income taxes. On balance, they estimated that most individuals would pay less than they do now.

The size of the personal exemption and the rate can be negotiated. Congress could enact a higher rate and a higher exemption so that more people would pay no income taxes at all. What is not negotiable is the issue of a single rate on businesses and individuals. Take that away, and the whole system collapse.

After signing four big tax bills into law since 2001, President Bush now says that taxes need radical reform, as if he had just arrived in Washington.

One option that will be discussed is the famous but widely misunderstood flat tax. The flat tax is famous because people have been told it can be filed on a postcard. People think it is fair because everybody pays the same rate.

Neither is true.

The Only way to squeeze an income tax onto a postcard is to eliminate the deductions and credits and to allow business firms to pay taxes according to the honor system. Many of the deductions – for charitable contributions, mortgage interest, and state and local income and property taxes – would be sorely missed by tens of millions of taxpayers.

On the business side, the lack of information provided to the Internal Revenue Service would be a great inducement to cheat on taxes – and an incentive for the IRS to conduct more audits.

On the subject of fairness, the same rate on all might be fair if everyone were the same. But one family has children another has disabled dependents, another high medical expenses, etc. The income tax is able to take account of such things. The flat tax cannot.

Of course, people have different incomes. A basic principle of our tax system is the greater you ability to pay tax, the more you pay. The flat tax honors this principle to a much weaker extent than the current system.

The flat tax is really good at taxing wages. It also taxes fringe benefits and wages used to pay state and local taxes. People with other types of income would face a much lighter burden than they do now, while workers would pay more.