Matt Yglesias warns that we shouldn’t throw out tax progressivity under the guise of tax reform.
Tax code simplification is in the air. And it’s a good idea. Also in the air is the flat tax. This is a bad idea. Importantly, these two ideas have no relationship to one another, mythologizing on the part of the flat taxers notwithstanding. Think about it. You’ve paid taxes. It was complicated. But did the existence of different tax brackets significantly contribute to the complexity? Of course not.
Good point. But it raises a question I’ve had for a while. Why do we even have discrete tax brackets? Why not a sliding scale where the tax rate depends on your taxable adjusted income? Sure, such an algebraic tax rate seems more complicated, but those filling out tax forms already reference a table that tells them their taxes and those using electronic filing are told automatically.
What a smooth-sloped variable tax rate would accomplish is the elimination of those pesky marginal rates that conservatives are always decrying. And it certainly would undercut conservatives’ point that tax credit recipients (poorer people) have to deal with the same problem as the rich. Gone all around would be thresholds where the level of taxation would dramatically rise.
Am I missing some reason this would not work, besides “we’ve always done it that way”? This is a genuine question.
Mind you, this line of thought may be an academic exercise given that the party in power actively seeks both tax simplification and curbing of progressivity both. So my idea, even if it is valid, has zero chance of ever happening. Still, it’s worth pointing out that both are going on and that they’re not the same thing.
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