Word: rabushka
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...that's true, the flat tax would collect less money than the current system, at least in the short term. Robert Hall, a conservative Stanford University economist, who with his colleague Alvin Rabushka literally wrote the book on the subject (The Flat Tax, 1985), estimates that Forbes' scheme would widen the federal deficit by $182 billion a year--just when a majority of voters in both parties say they want a balanced budget before new tax cuts. Forbes, a believer in the quasi-theology called supply-side economics, assumes that tax cuts, even when financed by federal borrowing, will generate...
Still, even conservative economists and tax experts say middle-class Americans are not likely to make out as well under the Forbes plan as he promises. To raise as much revenue as the current tax system, the Hall-Rabushka plan starts at a 19% tax rate, 2 points higher than Forbes', and exempts much less income from taxation--$25,000 instead of $36,000. Hall and Rabushka estimate that under their proposal, taxpayers with incomes between $30,000 and $90,000 would pay slightly more in income taxes than they do now. That is in part because an unavoidable cost...
Into this tax hell come proposals for salvation: everything from tinkering with the system to imposing a flat tax. The intellectual cheerleaders for the flat tax are Hall and Rabushka, both economists at Stanford's Hoover Institution. Their writings inspired the flat tax for which Jerry Brown won a flurry of attention during the 1992 Democratic primaries. Another disciple is House majority leader Armey, sponsor of the leading flat-tax plan now before Congress...
Ironically, Ronald Reagan's 1986 tax reform was inspired in part by a golf- course conversation with George Shultz, his Secretary of State, who praised the same 1981 consumption-tax plan, authored by Stanford economists Robert Hall and Alvin Rabushka, on which Jerry Brown claims to have (very loosely) based his current proposal. One of the most elegant consumption-tax plans was ! crafted even earlier, in 1977, by economist David Bradford and his Treasury tax-policy staff...
...expense of other taxpayers. While that may be true for crude plans like Jerry Brown's, it is not immutable. A consumption code can be made as progressive as one wishes, by adding brackets (the 1977 Treasury plan proposed brackets of 10%, 28% and 40%) and generous exemptions (Hall-Rabushka would not tax the first $16,000 of income). A consumption tax also would tax gifts and inheritances like any other income, unlike current law, which favors the rich. And since even wealthy taxpayers spend nearly as much as they earn over the course of their lives, the consumption...