A newly named Nobel Prize winner in economics has a surprisingly simple idea for America’s complicated tax system. Everyone pays 19%, period. You can put your entire tax return on a post card.
Stanford economist Robert Hall, who shares this year’s Nobel Prize in Economics, is also the co-author of a proposal to replace the federal income tax system with a single flat tax.
Developed with economist Alvin Rabushka, the plan calls for one tax rate, a generous exemption protecting lower-income households, and eliminating many deductions and loopholes. The goal? A tax return simple enough to fit on a postcard.
The St. Louis Fed, in 1996 said the flat tax could help taxpayers making less than $30k and more than $100k (in 1996 dollars) same money while the folks in between might pay slightly more. Supporters say the flat tax would encourage investment, savings and economic growth. Critics question–as they always do–whether it would benefit the wealthy, shifting more of the tax burden onto middle-income Americans.
Developed with economist Alvin Rabushka, the plan would replace today’s graduated income tax rates with a single 19-percent rate on taxable income, while exempting a basic amount of household earnings.
Businesses would pay the same rate, with investment costs deducted immediately. The proposal would also eliminate taxes on personal interest, dividends and capital gains, along with many deductions and loopholes.
The goal? A simpler tax system, less paperwork, and stronger incentives to save, invest and grow the economy, make things more affordable.
Hall won the Nobel for his separate research on economic stability, not his tax proposal.
And while California maintains one of the nation’s most complicated progressive income tax systems, the new Nobel laureate has spent decades arguing that simpler taxes could make for a stronger economy.
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