A few weeks ago, the covers of both Newsweek and Time featured rising presidential candidate Steve Forbes. Forbes's controversial flat-tax plan has ignited nationwide debate over the federal income tax code and its inherent inequities. One of Mount Holyoke's own, John Fox, is an expert on the tax code and offers valuable insight into this "new kid on the political block." A practicing tax attorney in Washington, DC, and visiting lecturer in complex organizations, Fox believes a flat tax is not the panacea that proponents claim.
They argue that subjecting all taxpayers to a single rate would not only eliminate inequities, but help business and boost the economy as well. Fox believes this is too simplistic and that a flat tax merely gives the illusion of equality. In reality, he explains, the wealthy would probably enjoy a significant tax cut--since capital gains, interest, and dividends would not be taxed--and the middle class would pay more to make up for the loss in revenue. Lower-income Americans would pay no taxes (as is generally true under current tax law), but parents would lose the earned-income credit that supplements their wages and therefore encourages them to work rather than stay on welfare. In addition, there are no reliable economic precedents to show that a flat tax would boost the economy. Fox predicts that as voters come to understand the flat tax in more detail, the middle class and corporate America will not rally around it.
Fox hopes, however, that the momentum created by the debate over the flat tax will spark genuine tax code reform. The complexity and inconsistency of the existing code not only make bad tax policy, says Fox, but also foster a general distrust in government. He believes that a much fairer tax code is possible--"not simple, but much simpler and workable, so that people are taxed more consistently on the basis of their income, including investment." Then, Fox says, tax rates can be reduced for everyone while retaining a progressive tax-rate structure. Fox believes that Congress's last major reform of the tax code in 1986 was a step in the right direction, and that a similarly extensive review is in order once again.
Fox, who teaches a seminar entitled Taxation and the Values of Democracy, is writing a book about the federal income tax code. Although it probably won't be out in time for the 1996 elections, it is intended to demystify the tax code for average Americans--and voters--and help them make informed decisions about it.