What's a fair tax system look like?

There will be considerable debate in the coming months about what "fairer, simpler" tax code should be adopted. There are interesting position papers available on flat tax rates, national sales taxes, and value-added tax systems. (Fair warning -- none of this fits neatly into 30 second radio news sound bites.)

I believe a simpler tax system, even with no exemptions, will promote economic growth. I believe a key issue is to create a system less prone to manipulation and less likely to promote lies to evade taxation. Therefore I'm suspicious of graduated tax systems and those with many possible exemptions.

Meditate for a few moments on the 10% tithe required of the Israelites to support the Levites and the priestly ministry. There were no exemptions. No means to shift payment to another timeframe. It applied whatever business you were in, wherever you lived, whatever stage of life, and whether you were the grossest sinner or the most godly person in the community. What if God had laid out a graduated plan and set up a series of exemptions? Think of how this would been manipulated, and how fast!

Alan Reynolds wrote a readable column recently listing seven technical reasons why a single rate flat tax would be the best solution.

The other challenging issue to consider the transition plan. It will be difficult to wean Congress away from one of their favorite means of operation. I haven't studied this, but suspect that many tax exemption laws have specified timeframes to continue -- it's probably not feasible by single fiat to change all these timeframes into a short time. The IRS regulations also currently drive reporting income and spreading taxes over multiple years (e.g., depreciation schedules are factor for capital purchases in businesses). There are millions of jobs associated with the status quo for taxes. If the work changes rapidly, those people will need to find gainful work in another area. (I would hope many would shift to the revenue-generating side of the economy.)

The complexity of the transition, coupled with the charged political environment and limited-scope voter, will require bold and clear leadership through a sea of uncertainty.

I have some suggestions that might help:

• Let's act like responsible adults. Take the focus off "what's best for me, now?" and shift it to "what's best for our children, in ten years?"
• Get back to a constitutional framework for the federal government, a much more limited government. Reversing (even slowing!) the trend to shifting responsibility of the federal government is a must.

May God help us, because neither of these is easy, either.