Fox pundits know that a “flat tax” sounds equitable but is anything but.
Near the end of a discussion about Donald Trump’s return to power, Fox News contributor Bill McGurn argued for “the logic” of a flat tax. That would “lower [taxes] for everyone and make it cleaner and simpler,” he said. “That’s the direction I hope they go rather than gunking up the code with even more provisions."
FACT CHECK: A flat tax benefits the wealthy and hurts everyone else. The non-profit, non-partisan Institute on Taxation and Economic Policy (ITEP) sums it up: Flat taxes have some surface appeal but come with significant disadvantages. Critically, a flat tax guarantees that wealthy families’ total state and local tax bill will be a lower share of their income than that paid by families of more modest means.
More specifically, ITEP notes, “Flat taxes consign states to regressive and inequitable taxation that falls short of the 'flat tax' ideal" and they "don't advance the economic, budgetary, or simplicity goals commonly used to advocate for their enactment." A flat tax favors people "with the highest incomes" and "leave states ill-equipped to deal with the regressive effects of their other taxes."
Not surprisingly, host Ed Lawrence didn’t mention any of that. The only problem he mentioned was a likely “uphill battle” in Congress.
McGurn replied, "It would be a huge battle, but I think it's worth at least raising the question. I think most Americans are for it. They're tired of a tax code that's so complicated. I lived in Hong Kong for 10 years. The tax code was a flat tax, you could fill out the tax form in a half an hour, and I think people like that."
"We’ll have to see what happens,” Lawrence said, then closed the discussion.
You can watch it below, from the November 25, 2024 Your World.
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Project 2025 details an intent to change the US federal tax code to just have 2 flat rates – 15% and 30%, with no deductions at all for employees. The only caveat there is when the higher rate would come into play – which would likely be somewhere a bit north of 100K per year. This would mean a massive tax increase for Middle Class Employees, particularly in Blue States, just like the last one was as of 2018. Project 2025 says nothing about Social Security.
On the other hand, the GOP “Republican Study Committee” (aka the brain trust of the GOP majority in the House) is pursuing something closer to the Heritage Foundation’s plans. When it comes to federal taxes, they would prefer to just expand the 2017 Tax Transfer, likely by lowering the book rate for the big corps to 15% (meaning the effective rate would be zero), by giving the uber wealthy more big cuts, and by hitting Middle Class Employees in Blue States with another massive increase. We can expect the SALT deduction to be completely erased, along with any remaining deductions for the Middle Class, and other rules and restrictions thrown in to make sure that the Employees don’t try to claim any contractor deductions. And we can expect another increase in brackets for anyone making over 100K. So another skyrocket for the “urbanites who voted for Hillary”.
But wait, there’s more. Much more. The GOP plans for gutting Social Security and Medicare didn’t need to be included in Project 2025 because they’ve been public for nearly 15 years already. Heritage published the plans back in 2010 and they’re quite simple. For SS, there are three changes the GOP will implement as part of an omnibus tax bill in 2025: First, the retirement eligibility age is going up to 69. Second, the monthly benefit will be reduced to a flat amount – Heritage recommends 1200/month with an option to increase maybe once in a blue moon, say in 2050 or 2075 when they could take it to 1400/month. Third, and best of all, Heritage and the GOP have discussed a strict means test. Heritage was basing it on what people have in retirement assets and income. The GOP are nicer – they’re basing it on what people earn as an average over their working lifetimes. Per the GOP’s latest discussion of this, from June 2024, any Employee who averages $80,625/year over their career would not qualify for the SS payments. And that’s not even the best part yet. The best part is that the GOP will apply the new rules to everyone 59 years old or younger, assuming they don’t expand this to 61 or 62 next year. As for Medicare, that would become a simple voucher, which would allow recipients to use their 1200/month on whatever doctor agrees to take such vouchers. And that’s it.
Certainly modern Employees will rage at this, given that millions will have paid large amounts into FICA over the past several decades, only to be told that their payments went out the window for them. Not to mention that anyone under 60 years old expecting a monthly SS check will need to budget for no longer qualifying, or for only receiving a fraction of what had been promised. The common refrain we hear about this is that the GOP wouldn’t actually do this because voters will be angry about it. Given the GOP’s track record over the past 30 years, we shouldn’t base our hopes on that. It is far more likely that Angry Right Wingers are counting on voter anger here, which they’ll redirect at the Dems with lines like “Hey, we’re saving Social Security! The Dems blew it! We told you this wouldn’t work, and now we’re the ones cleaning up the Dems’ mess! Are you saying you want your parents and grandparents to starve? What’s the matter with you?”
