NCPA - National Center for Policy Analysis

BUSH'S FLAT TAX

November 3, 2004

Every president since Jimmy Carter has promised tax reform, yet the size of the tax code has nearly doubled over the last 30 years. But economist Stephen Moore says President Bush's interest in tax reform may be more than just a passing fancy.

Moore believes that tax reform, such as simplifying the tax code and establishing a flat tax, would be a strong driver of economic growth:

  • If all the loopholes and inconsistencies were removed from the tax code, the federal tax rate could be cut by about 18 percent and the same amount of revenue would be generated.
  • It is estimated that shifting from the current graduated system to a flat-tax on consumption would permanently increase national income by about 5 to 10 percent.

Part of the reason why tax reform may be a reality this time around is because of its success elsewhere in the world. Hong Kong and Russia, for example, have adopted a flat tax and have enjoyed strong growth rates since their inception.

Moore also points out that Bush's prior policies suggest a pattern consistent with implementing a flat tax, such as flattening tax rates, eliminating double taxation on saving and investment, reducing the death tax, and expanding tax-free IRA-type retirement accounts.

Source: Stephen Moore, "Bush's Stealth Flat Tax," Weekly Standard, September 13, 2004.

 

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