Tax Guru – Ker$tetter Letter

Half Right

This piece by Pete Du Pont has it half right. Lowering tax rates does stimulate the economy and increase overall tax revenues for the government. In fact, one of my biggest pet peeves with the politicians in DC, of both parties, is their unwillingness to tell the truth about the Reagan tax cuts of the early 1980s. Whenever I hear anyone say that lower tax rates caused the deficit, I automatically know that that person is a liar and cannot be trusted for anything. Revenues to the Feds doubled because of the lower tax rates; but the deficit grew because the level of spending tripled.

Back to the incorrect part of Mr. Du Pont’s article; that a flat tax would simplify the hassles we have to go through this time of year. It is a widely held misconception that a flat tax rate will simplify the tax return process. That’s not even close to being accurate. There is still a need to calculate the taxable income, which is where all the fun & games are. What kinds of income are subject to tax. What kinds of things are deductible. If anyone thinks Congress can refrain from complicating these issues, you should let Bill Clinton babysit your teenage daughter.

I agree that the income tax system is beyond repair, and I make a very good living working with it. Only something radically different, such as a sales tax, will simplify anything.

KMK